[ LOGO ] PROSPECTUS SUPPLEMENT
DaimlerChrysler (To Prospectus dated March 1, 1999)
$1,350,000,000
CARCO Auto Loan Master Trust
Floating Rate Auto Loan Asset Backed Certificates, Series 1999-2
$750,000,000 Class A-1 Certificates, due May 17, 2004
$600,000,000 Class A-2 Certificates, due May 15, 2006
[ LOGOS ]
U.S. AUTO RECEIVABLES COMPANY, Seller
CHRYSLER FINANCIAL COMPANY L.L.C., Servicer
Before you decide to invest in the Series 1999-2 Certificates,
please read this Prospectus Supplement and the Prospectus,
especially the Risk Factors beginning on page S-8 of this
Prospectus Supplement and page 16 of the Prospectus.
The Series 1999-2 Certificates are obligations of the Trust only
and do not represent interests in or obligations of U.S. Auto
Receivables Company, Chrysler Financial Company L.L.C. or any of
their affiliates.
General:
* The Trust assets include wholesale Receivables generated from time to time
in a portfolio of revolving financing arrangements with automobile dealers
to finance their automobile and light duty truck inventory. The Trust's
main source of funds for making payments on the Series 1999-2 Certificates
is collections on the wholesale Receivables.
* Interest on the Class A-1 Certificates will accrue at the rate of 0.07% per
annum above LIBOR, subject to certain limitations. Interest on the Class
A-2 Certificates will accrue at the rate of 0.13% per annum above LIBOR,
subject to certain limitations. Interest will be payable on the 15th of
each month, unless the 15th is not a business day, in which case the
payment will be made on the following business day. The first payment will
be on June 15, 1999.
* Principal of the Class A-1 Certificates is expected to be paid on May 15,
2002. Principal of the Class A-2 Certificates is expected to be paid on May
17, 2004.
* The Seller's interest in the Trust will be subordinated to the rights of
the holders of the Series 1999-2 Certificates to the limited extent
described in this Prospectus Supplement.
The Underwriter will purchase the Series 1999-2 Certificates. The
Underwriter will offer the Certificates from time to time to the public at
varying prices. The Underwriter will pay to the Seller 99.9214% of the
principal amount of the Class A-1 Certificates and 99.9464% of the principal
amount of the Class A-2 Certificates plus, in each case, accrued interest
from May 20, 1999. The Seller's expenses of the offering are estimated to be
$637,300.
We expect that delivery of the Series 1999-2 Certificates will be made
in book-entry form only through the facilities of The Depository Trust
Company on or about May 20, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the Series 1999-2 Certificates or
determined that this Prospectus Supplement or the Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
-------------------------
Salomon Smith Barney
-------------------------
This Prospectus Supplement is dated May 13, 1999.
Content of Prospectus Supplement and Prospectus
You should rely only on the information contained in this document. We
have not authorized anyone to provide you with different information. You
should not assume that the information in the Prospectus Supplement or the
Prospectus is accurate as of any date other than the date at the bottom of
the front page of this document.
We provide information to you about the Series 1999-2 Certificates in
two separate documents that progressively provide more detail:
(A) the Prospectus, which provides general information, some of
which may not apply to the Series 1999-2 Certificates, and
(B) this Prospectus Supplement, which describes the specific
terms of the Series 1999-2 Certificates.
If the terms of the Series 1999-2 Certificates vary between this
Prospectus Supplement and the accompanying Prospectus, you should rely on the
information in this Prospectus Supplement.
We include cross-references in this Prospectus Supplement and the
Prospectus to captions in these documents where you can find further related
discussions. The Table of Contents on the back cover and on page S-3 of this
document provides the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in
this Prospectus Supplement and the Prospectus are defined under the caption
"Index of Principal Terms" on page S-39 in this Prospectus Supplement and
under the caption "Index of Principal Terms" beginning on page 66 in the
Prospectus.
Limitations on Offers or Solicitations
We do not intend this document to be an offer or solicitation:
(A) if used in a jurisdiction in which such offer or solicitation
is not authorized;
(B) if the person making such offer or solicitation is not
qualified to do so; or
(C) if such offer or solicitation is made to anyone to whom it is
unlawful to make such offer or solicitation.
Transactions That May Affect the Price of the Series 1999-2 Certificates
The Underwriter may engage in transactions that stabilize, maintain, or
otherwise affect the price of the Series 1999-2 Certificates. Such
transactions may include stabilizing and the purchase of Series 1999-2
Certificates to cover syndicate short positions. For a description of these
activities, see "Underwriting" herein.
S-2
TABLE OF CONTENTS
Page
----
SUMMARY OF SERIES TERMS ............................. S-4
Title of Securities ............................... S-4
Issuer ............................................ S-4
Seller ............................................ S-4
Servicer .......................................... S-4
Trustee ........................................... S-4
Invested Amount ................................... S-4
Series Insurance Date ............................. S-4
Series Cut-Off Date ............................... S-4
Terms of the Certificates ......................... S-4
Legal Finals ...................................... S-5
Revolving Period .................................. S-5
Accumulation Period ............................... S-5
Early Amortization Period ......................... S-5
Credit Enhancement ................................ S-5
Yield Supplement Account .......................... S-6
Excess Principal Collections ...................... S-6
Required Participation Percentage ................. S-6
Registration of Series 1999-2 Certificates ........ S-6
Servicing Fee Rate ................................ S-7
Optional Repurchase ............................... S-7
Other Series of Certificates ...................... S-7
ERISA Considerations .............................. S-7
Tax Status ........................................ S-7
Certificate Ratings ............................... S-7
RISK FACTORS ........................................ S-8
Timing of Principal Payments May Not
be as Expected .................................. S-8
Interest Rates on the Certificates May be Lower
than Expected ................................... S-9
Credit Enhancement is Limited and May be Reduced .. S-10
The Trust is Dependent on CFC and DaimlerChrysler.. S-10
USE OF PROCEEDS ..................................... S-11
THE DEALER FLOORPLAN FINANCING BUSINESS ............. S-11
THE ACCOUNTS ........................................ S-12
CFC'S PEFORMANCE HISTORY ............................ S-13
Loss Experience ................................... S-13
Aging Experience .................................. S-14
Geographic Distribution ........................... S-14
CHRYSLER FINANCIAL COMPANY L.L.C .................... S-15
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS ....... S-15
SERIES PROVISIONS ................................... S-16
General ........................................... S-16
Interest .......................................... S-16
Principal ......................................... S-18
Excess Funding Account ............................ S-21
Allocation Percentages ............................ S-22
Principal Collections for all Series .............. S-24
Allocation of Collections; Limited Subordination of
Seller's Interest ............................... S-24
Deficiency Amount ................................. S-25
Available Subordinated Amount ..................... S-26
Distributions from the Collection Account; Reserve
Fund; Yield Supplement Account .................. S-27
Principal Collections ............................. S-30
Required Participation Percentage ................. S-32
Principal Funding Account ......................... S-32
Distributions ..................................... S-32
Optional Repurchase ............................... S-34
Investor Charge-Offs .............................. S-34
Early Amortization Events ......................... S-34
Termination ....................................... S-36
Reports ........................................... S-36
UNDERWRITING ........................................ S-37
LEGAL MATTERS ....................................... S-38
INDEX OF PRINCIPAL TERMS ............................ S-39
OTHER SERIES OF INVESTOR CERTIFICATES................ SA-1
S-3
SUMMARY OF SERIES TERMS
This summary highlights selected information from this Prospectus
Supplement and may not contain all the information that you need to consider
in making an investment decision. You should carefully read this document and
the accompanying Prospectus. You will find a detailed description of the
terms of the Series 1999-2 Certificates following this summary and in the
Prospectus.
Title of Securities .... Floating Rate Auto Loan Asset Backed Certificates,
Series 1999-2 (the "Series 1999-2 Certificates").
The Series 1999-2 Certificates will be issued in
two classes (each, a "Class"), the Class A-1
Certificates, Series 1999-2 (the "Class A-1
Certificates") and the Class A-2 Certificates,
Series 1999-2 (the "Class A-2 Certificates").
Issuer ................. CARCO Auto Loan Master Trust (the "Trust").
Seller ................. U.S. Auto Receivables Company ("USA"), a wholly
owned subsidiary of Chrysler Financial Company
L.L.C. ("CFC").
USA's executive offices are located at 27777
Franklin Road, Southfield, Michigan 48034-8286, and
its telephone number is (248) 948-3031.
Servicer ............... CFC, a wholly owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler").
Trustee ................. The Bank of New York.
Invested Amount ......... The total principal amount of the Series 1999-2
Certificates invested in Receivables on the date
they are issued (the "Invested Amount") is expected
to be approximately $1,350,000,000.
The Invested Amount will initially be allocated pro
rata between the Class A-1 Certificates (the "Class
A-1 Invested Amount") and the Class A-2
Certificates (the " Class A-2 Invested Amount")
based on their respective outstanding principal
amounts.
The Invested Amount is subject to decreases and
increases as described in this Prospectus
Supplement under the caption "Series Provisions --
Allocation Percentages".
Series Issuance Date .... May 20, 1999.
Series Cut-Off Date .... April 30, 1999.
Terms of the Certificates:
A. Interest Payment
Dates ............... Interest will be payable on the 15th of each month,
unless the 15th is not a business day, in which
case the payment will be made on the following
business day (each, a "Distribution Date"). The
first payment will be on June 15, 1999.
B. Per Annum Interest
Rates ................ Class A-1: 0.07% above LIBOR or, if lower, the
Assets Receivables Rate described herein.
Class A-2: 0.13% above LIBOR or, if lower, the
Assets Receivables Rate.
S-4
C. Interest Periods .. Distribution Date to the day prior to the following
Distribution Date, except that the first Interest
Period will be 26 days.
D. Principal
Payments ............. Principal of the Certificates is scheduled to be
paid in full on the following "Expected Payment
Dates":
Class Expected Payment Date
- ----- ---------------------
A-1 May 15, 2002
A-2 May 17, 2004
However, certain circumstances could cause
principal to be paid earlier or later, or in
reduced amounts. See "Maturity and Principal
Payment Considerations" in this Prospectus
Supplement.
Legal Finals ............ The Trust shall pay the outstanding principal amount
of a class of Certificates, to the extent not
previously paid, by the following date:
Class Legal Final
- ----- -----------
A-1 May 17, 2004
A-2 May 15, 2006
Revolving Period ........ The Revolving Period will begin at the close of
business on the Series Cut-Off Date and end, in the
case of the Class A-1 Certificates, when the Class
A-1 Accumulation Period begins or, in the case of
the Class A-2 Certificates, when the Class A-2
Accumulation Period begins. The Revolving Period
will also end if an Early Amortization Period that
is not terminated begins.
Accumulation Period ..... Each Class of the Series 1999-2 Certificates will
have an Accumulation Period of between one and five
months long unless an Early Amortization Period
that is not terminated begins before the start of
the Accumulation Period.
See "Series Provisions -- Principal" in this
Prospectus Supplement.
Early Amortization
Period ............... The Series 1999-2 Certificates will have an Early
Amortization Period if an Early Amortization Event
occurs and is not cured. See "Description of the
Certificates -- Reinvestment Events and Early
Amortization Events" in the Prospectus and "Series
Provisions -- Early Amortization Events" in this
Prospectus Supplement for a description of the
events that might cause an Early Amortization
Period to start and, in certain cases, terminate.
Credit Enhancement:
A. Subordination of
the Seller's
Interest.............. The Seller's Interest will be subordinated to the
rights of the Series 1999-2 Certificateholders to
the extent described in this Prospectus Supplement.
Collections on the Receivables otherwise allocable
to the Seller may be used to pay interest on the
Series 1999-2 Certificates and certain other
amounts, but only to the extent of the "Available
Subordinated Amount".
The Available Subordinated Amount will initially be
$150,000,000
S-5
but is subject to reduction from time to time. See
"Series Provisions -- Allocation of Collections;
Limited Subordination of Seller's Interest" in this
Prospectus Supplement for more information about
the Available Subordinated Amount.
B. Reserve Fund ...... The "Reserve Fund" will be a trust account
established and maintained in the name of the
Trustee for the benefit of the Series 1999-2
Certificateholders. On the Series Issuance Date,
the Seller will deposit $4,725,000 into the Reserve
Fund. The Reserve Fund Required Amount for any
Distribution Date will equal 0.35% of the
outstanding principal balance of the Series 1999-2
Certificates for such Distribution Date (after
giving effect to any change therein on such
Distribution Date).
Amounts on deposit in the Reserve Fund will be
available to pay Monthly Interest, the Monthly
Servicing Fee and Investor Default Amounts and, on
the Final Payment Date for a Class, Carry-over
Amounts for such Class.
Yield Supplement
Account................ The "Yield Supplement Account" will be a trust
account established and maintained in the name of
the Trustee for the benefit of the Series 1999-2
Certificateholders. On the Series Issuance Date,
the Seller will deposit $5,400,000 in the Yield
Supplement Account. The Yield Supplement Account
required amount for any Distribution Date will
equal 0.40% of the outstanding principal balance of
the Series 1999-2 Certificates for such
Distribution Date (after giving effect to any
change therein on such Distribution Date).
Amounts on deposit in the Yield Supplement Account
will be available to pay Carry-over Amounts.
Excess Principal
Collections ........... Principal Collections allocable to other Series, to
the extent not needed to make payments in respect
of such other Series, will be applied to make
principal payments in respect of the Series 1999-2
Certificates and of other Series of Certificates
entitled thereto.
Required Participation
Percentage ........... The "Required Participation Percentage" for Series
1999-2 is 103%, except that:
* if the amount of Principal Receivables due from
any Dealer and its affiliates at the end of any
month is greater than 1.5% of the Pool Balance,
the Required Participation Percentage for that
month and the following month will be 104%; and
* the Seller may reduce the Required Participation
Percentage to not less than 100% if the reduction
will not result in any Rating Agency reducing or
withdrawing its rating of any outstanding Series
or Class of Certificates.
Registration of Series
1999-2 Certificates .. The Series 1999-2 Certificates will be registered
in the name of Cede, as the nominee of the
Depository Trust Company ("DTC"). No person with an
interest in the Series 1999-2 Certificates will
receive a definitive certificate representing that
interest except in limited circumstances.
S-6
Series 1999-2 Certificateholders may hold their
Series 1999-2 Certificates only through DTC. See
"Description of the Certificates -- Definitive
Certificates" in the accompanying Prospectus.
Servicing Fee Rate ..... 1.0% per annum (on a 30/360 day basis), or less if
the Servicer waives any portion of the Monthly
Servicing Fee on any date.
Optional Repurchase ..... The Class A-1 Certificateholders' interest in the
Trust is subject to optional repurchase by CFC on
any Distribution Date after the Class A-1 Invested
Amount is reduced to $75,000,000 or less.
The Class A-2 Certificateholders' interest in the
Trust is subject to optional repurchase by CFC on
any Distribution Date after the Class A-2 Invested
Amount is reduced to $60,000,000 or less.
Other Series of
Certificates ........ The Trust has previously issued and may issue
additional Series of Certificates. A summary of
Series currently outstanding is contained in "Annex
I -- Outstanding Series of Investor Certificates"
at the end of this Prospectus Supplement.
ERISA Considerations ... It is expected that the Series 1999-2 Certificates
will be eligible for purchase by employee benefit
plans. However, plans contemplating the purchase of
Certificates should consult their counsel before
making a purchase. See "ERISA Considerations" in
the Prospectus.
Tax Status .............. In the opinion of Tax Counsel, the Certificates
will properly be characterized as indebtedness of
the Seller that is secured by the Receivables and
any other Trust assets allocable to the
Certificates. Each Certificateholder, by the
acceptance of a Certificate, will agree to treat
the Certificates as indebtedness of the Seller for
federal, state and local income and franchise tax
purposes and Michigan single business tax purposes.
Certificate Ratings ..... The Series 1999-2 Certificates will be issued only
if they are rated in the highest long-term rating
category by at least one nationally recognized
rating agency.
S-7
RISK FACTORS
The Timing of Principal Payments May Not be as Expected. Several
factors will have an effect on the amount and timing of principal payments on
the Series 1999-2 Certificates. Some of those factors are described below.
Dependence on Other Series' Allocated Principal
Collections May Result in Late Payment of Series
1999-2 Certificate Principal:
* The shorter the applicable Accumulation Period the greater the chance
that payment in full of the Class A-1 Certificates by the Class A-1
Expected Payment Date or that payment in full of the Class A-2
Certificates by the Class A-2 Expected Payment Date will depend on
Principal Collections from other Series. A Series from which Principal
Collections are expected to be available to make payments on the Class
A-1 Certificates may enter an early amortization period or
reinvestment period after the November 2001 Distribution Date. A
Series from which Principal Collections are expected to be available
to make payments on the Class A-2 Certificates may enter such a period
after the November 2003 Distribution Date. In either case, Principal
Collections from such Series generally will not be available to pay
principal of the Class A-1 Certificates or the Class A-2 Certificates,
as applicable. As a result, the final payment of principal of the
Class A-1 Certificates or the Class A-2 Certificates may be later than
the Expected Payment Date for that Class. On written request, the
Seller will give Series 1999-2 Certificateholders Disclosure Documents
relating to the other outstanding Series. Those documents describe the
events which could result in the start of an early amortization period
or reinvestment period for those Series.
Early Amortization of Series 1999-2 May Result in
Early, Late and/or Reduced Payment of Series 1999-2
Certificate Principal:
* A significant decline in the amount of Receivables generated could
cause an Early Amortization Event. Such a reduction would initially be
covered by deposits of collections to the Excess Funding Account. If
the Pool Balance is not maintained at a specified level, CFC must
designate additional Accounts, the Receivables of which will be sold
to the Seller. The Seller will be required to transfer those
Receivables to the Trust. If additional Accounts are not designated by
CFC when required, an Early Amortization Period will begin. In certain
cases, however, the resulting Early Amortization Period may end and
the Revolving Period will start again.
Certain Bankruptcy Events of CFC, the
Seller or DaimlerChrysler may result in late
payment of Certificate Principal:
* If a bankruptcy event relating to CFC, the Seller or DaimlerChrysler
transpired, an Early Amortization Event would occur. In that case
additional Receivables would not be transferred to the Trust and
principal payments on the Series 1999-2 Certificates would not be
limited to the scheduled amount.
Risks Associated with Computer Systems and the Year
2000:
* CFC will service the Receivables on behalf of the Trust. CFC has
conducted an evaluation of the actions necessary to ensure that its
business critical computer systems will function without disruption
with respect to the application of dating systems in the Year 2000. As
a result of this evaluation, CFC is engaged in the process of
upgrading, replacing and testing certain of its information and other
computer systems. While CFC's remedial actions are scheduled to be
completed during the third quarter of 1999,
S-8
there can be no assurance that the remedial actions being implemented
by CFC will be completed in time to avoid dating systems problems. If
CFC is unable to complete its remedial actions in the planned time
frame, contingency plans will be developed to address those business
critical systems that may not be Year 2000 compliant.
* In addition, disruptions with respect to computer systems of vendors
or customers, which are outside the control of CFC, could impair the
ability of CFC to obtain necessary services or to provide services to
its customers. CFC has a process in place to assess the Year 2000
readiness of its business critical vendors and customers. As part of
the assessment process, CFC will develop contingency plans for those
business critical vendors who are either unable or unwilling to
develop remediation plans to become Year 2000 compliant. Although
these plans have yet to be developed, it is expected that these plans
will include selective resourcing of services to Year 2000 compliant
vendors and will be in place by the third quarter of 1999.
* Any inability to complete the remedial actions referred to in the
preceding two paragraphs in a timely manner could result in delays in
collections on the Receivables and payments on the Certificates.
See "The Dealer Floorplan Financing Business" in the Prospectus and "Maturity
and Principal Payment Considerations" and "Series Provisions -- Early
Amortization Events" in this Prospectus Supplement for more information about
the timing of payments on the Series 1999-2 Certificates.
Interest Rates on the Certificates May be Lower than Expected. The
Receivables generally bear interest at the prime rates of certain banks plus
a margin, while the Certificate Rates are based on LIBOR. Several factors
will have an effect on the interst rates of the Certificates. Some of those
factors are described below.
The Class A-1 Certificate Rate and Class A-2
Certificate Rate are limited by the Assets
Receivables Rate:
* The "Assets Receivables Rate" is based on the interest rates on the
Receivables and investment earnings on amounts on deposit in certain
Trust bank accounts. If (a) the Class A-1 Certificate Rate or Class
A-2 Certificate Rate based on LIBOR exceeds (b) the Assets Receivables
Rate, the Class A-1 Certificate Rate or the Class A-2 Certificate
Rate, as applicable, will be the Assets Receivables Rate.
The Trust may not be able to make up a deficiency in
interest payments if the Class A-1 Certificate Rate
or Class A-2 Certificate Rate is higher than the Assets
Receivables Rate:
* Either Certificate Rate based on LIBOR may exceed the Assets
Receivables Rate as a result of (i) LIBOR exceeding the interest rate
on the Receivables (which may be reduced by CFC) and (ii) LIBOR
exceeding the investment earnings on amounts, if any, on Trust
accounts in which principal collections are held. Any deficiency in
interest payments resulting from the Assets Receivables Rate being
lower than either Certificate Rate based on LIBOR and interest on such
deficiency (a "Carry-over Amount") will be paid with:
(i) any amounts in the Yield Supplement Account;
(ii) any funds remaining after all required distributions and deposits
for the Series 1999-2 Certificates have been made; and
S-9
(iii) on the last payment date for Series 1999-2, certain amounts in
the Reserve Fund and Available Seller's Collections.
The Seller cannot assure that those amounts, if any, will be sufficient to
pay Carry-over Amounts. If any Carry-over Amount is outstanding for six
Distribution Dates in a row, an Early Amortization Event will occur.
Credit Enhancement is Limited and May be Reduced. Credit enhancement
of the Series 1999-2 Certificates will be provided by the subordination of
the Seller's Interest to the extent of the Available Subordinated Amount as
described in this Prospectus Supplement and by amounts in the Reserve Fund.
The amount of such credit enhancement is limited and will be reduced from
time to time. See "Series Provisions -- Allocation of Collections; Limited
Subordination of Seller's Interest" for more information aboutcredit
enhancement for the Series 1999-2 Certificates.
The Trust is Dependent on CFC and DaimlerChrysler. The Trust is
completely dependent upon CFC for the generation of new Receivables. The
ability of CFC to generate Receivables is in turn dependent to a large extent
on the sales of automobiles and light duty trucks manufactured or distributed
by DaimlerChrysler. Several factors will have an effect on such dependence.
Some of those factors are described below.
Information about CFC, DaimlerChrysler and
DaimlerChrysler AG:
* CFC and its consolidated subsidiaries achieved net earnings of $96
million for the three months ended March 31, 1999, compared to $108
million for the three months ended March 31, 1998. CFC is a wholly
owned subsidiary of DaimlerChrysler. DaimlerChrysler and its
consolidated subsidiaries achieved net earnings of $1,155 million for
the three months ended March 31, 1999, compared to $1,052 million for
the three months ended March 31, 1998. DaimlerChrysler is a wholly
owned subsidiary of DaimlerChrysler AG. DaimlerChrysler AG and its
consolidated subsidiaries' net earnings were (euro)1,163 million for
the three months ended March 31, 1999, compared to (euro)1,453 million
for the three months ended March 31, 1998.
* On October 25, 1998, CFC succee ded to the operations of Chrysler
Financial Corporation ("CFC Corp.") and acquired its assets and
assumed its debts and other obligations.
* On November 12, 1998, Chrysler Corporation ("Chrysler") became a
wholly-owned subsidiary of DaimlerChrysler AG and on November 17,
1998, Chrysler changed its name to DaimlerChrysler Corporation.
S-10
USE OF PROCEEDS
After making the deposits to the Reserve Fund and the Yield Supplement
Account described herein, the net proceeds from the sale of the Series 1999-2
Certificates will be paid to USA. USA will use such proceeds (together with
the subordinated loan from CFC described under "U.S. Auto Receivables Company
and the Trust -- U.S. Auto Receivables Company" in the Prospectus) to
purchase Receivables from CFC or to repay certain amounts previously borrowed
to purchase Receivables. CFC will use the portion of the proceeds paid to it
for general corporate purposes.
THE DEALER FLOORPLAN FINANCING BUSINESS
Information regarding the dealer floorplan financing business is set
forth under "The Dealer Floorplan Financing Business" in the Prospectus. In
addition, the Receivables sold to the Trust by the Seller pursuant to the
Pooling and Servicing Agreement were or will be selected from extensions of
credit and advances made by DaimlerChrysler, directly or as successor to
Chrysler, and CFC, directly or as successor to CFC Corp. or CCC, to
approximately 3,200 domestic motor vehicle dealers. CFC financed 56.5% of the
total number of all DaimlerChrysler-franchised dealers as of March 31, 1999.
Furthermore, CFC has extended credit lines to 1,176
DaimlerChrysler-franchised dealers that also operate non-DaimlerChrysler
franchises (representing approximately 41% of the aggregate credit lines of
dealers in the U.S. Wholesale Portfolio as of March 31, 1999) and 422
non-DaimlerChrysler dealers (representing approximately 15% of such aggregate
credit lines). As of March 31, 1999, the balance of Principal Receivables in
the U.S. Wholesale Portfolio was approximately $10.2 billion. CFC currently
services the U.S. Wholesale Portfolio through its home office and through a
network of 25 zone offices located throughout the United States.
As of March 31, 1999, the average credit lines per dealer in the U.S.
Wholesale Portfolio for new and used vehicles (which includes Auction
Vehicles) were $3.45 million and $0.47 million, respectively, and the average
balance of principal receivables per dealer was $3.20 million. As of March
31, 1999, the aggregate total receivables balance as a percentage of the
aggregate total credit lines was approximately 81.5%.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the U.S. Wholesale Portfolio.
Portfolio Percentages by Year
of Credit Line Origination
As of March 31, 1999
Prior to
1999 1998 1997 1996 1995 1994 1993 1993
- ---- ---- ---- ---- ---- ---- ---- --------
1.74% 8.60% 6.89% 5.58% 6.90% 3.55% 6.56% 60.18%
As of March 31, 1999, the weighted average spread over the Prime Rate
charged to dealers in the U.S. Wholesale Portfolio was approximately 0.79%.
Used Vehicles (which excludes Auction Vehicles) represented
approximately 3.47% of the aggregate principal amount of receivables in the
U.S. Wholesale Portfolio as of March 31, 1999. As of March 31, 1999, Used
Vehicles represented approximately 3.64% of the aggregate principal amount of
Receivables in the Trust (including Excluded Receivables).
S-11
The following table provides the percentage of dealers in the U.S.
Wholesale Portfolio that were subject to finance hold as of the dates
indicated.
Finance Hold Experience
As of December 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Percentage of Dealers .... 0.9% 2.1% 1.1% 1.8% 1.6% 3.2% 6.8% 9.4% 6.8% 4.6%
The following table provides the number and percentage of dealers in
Dealer Trouble Status in the U.S. Wholesale Portfolio as of the dates
indicated.
Dealer Trouble Experience
As of
March 31, As of December 31,
--------- ------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Number of Dealers ........ 29 21 24 20 6 12 21 56 100 129
Percentage of Dealers .... 0.9% 0.7% 0.7% 0.6% 0.2% 0.3% 0.6% 1.8% 3.1% 4.2%
THE ACCOUNTS
As of March 31, 1999, with respect to the Accounts in the Trust: (a)
there were approximately 2,900 Accounts and the Principal Receivables balance
was approximately $9.2 billion; (b) the average credit lines per Dealer for
new and used vehicles (which include Auction Vehicles) were approximately
$3.31 million and $0.49 million, respectively, and the average balance of
Principal Receivables per Dealer was approximately $3.18 million; and (c) the
aggregate total receivables balance as a percentage of the aggregate total
credit line was approximately 83.5%. Unless otherwise indicated, the
statistics included in this paragraph, in the table below and under "The
Accounts -- General" and " -- Geographic Distribution" with respect to the
Accounts and the Receivables in the Trust gives effect to approximately $11.9
million of principal receivables balances with respect to certain Dealers
(the "Excluded Receivables" and the "Excluded Dealers", respectively), that
are in voluntary or involuntary bankruptcy proceedings or voluntary or
involuntary liquidation or that, subject to certain limitations, are being
voluntarily removed by the Seller (or the Servicer on its behalf) from the
Trust. A portion of such principal receivables was created after such Dealers
entered into such status or were designated by the Seller (or the Servicer on
its behalf) for removal from the Trust and, as a result thereof, are owned by
CFC and not the Trust. Principal receivables balances created prior to such
Dealers entering into such status or being designated for removal from the
Trust are included in the Principal Receivables balance. See "Description of
the Certificates -- Removal of Accounts" in the Prospectus for a description
of the manner in which an Account can be removed from the Trust.
The following table sets forth the percentages of dealer account
balances by year of credit line origination for the accounts in the Trust.
Portfolio Percentages by Year
of Credit Line Origination
As of March 31, 1999
Prior to
1999 1998 1997 1996 1995 1994 1993 1993
- ---- ---- ---- ---- ---- ---- ---- --------
0.00% 5.00% 7.07% 5.89% 6.00% 3.84% 7.17% 65.03%
As of March 31, 1999, the weighted average spread over the Prime Rate
charged to Dealers was approximately 0.78%.
S-12
CFC'S PERFORMANCE HISTORY
Loss Experience
The following tables set forth the average Principal Receivables
balance and loss experience for each of the periods shown on the U.S.
Wholesale Portfolio. Because the Eligible Accounts will be only a portion of
the entire U.S. Wholesale Portfolio, actual loss experience with respect to
the Eligible Accounts may be different. There can be no assurance that the
loss experience for the Receivables in the future will be similar to the
historical experience set forth below with respect to the U.S. Wholesale
Portfolio. In addition, the historical experience set forth below reflects
financial assistance provided by Chrysler or DaimlerChrysler to
DaimlerChrysler-franchised dealers as described under "The Dealer Floorplan
Financing Business -- Relationship with DaimlerChrysler" in the Prospectus.
If DaimlerChrysler is not able to or elects not to provide such assistance,
the loss experience in respect of the U.S. Wholesale Portfolio may be
adversely affected. See "Risk Factors -- Trust's Relationship to
DaimlerChrysler and CFC" in the Prospectus and "Risk Factors -- Trust's
Relationship to DaimlerChrysler and CFC" in this Prospectus Supplement.
Loss Experience for the U.S. Wholesale Portfolio
Three Month
Ended March 31, Year Ended December 31,
--------------- ------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(Dollars in millions)
Average Principal Receivables Balance(1) ............ $9,791 $9,530 $9,236 $8,877 $8,825 $8,256 $6,754
Net Losses/(Net Recoveries)(2) ...................... $ (0) $ (0) $ 11 $ 4 $ (0) $ (1) $ (1)
Net Losses/(Net Recoveries) as a Percent of
Liquidations ...................................... (0.001)% (0.000)% 0.020% 0.007% (0.000)% (0.002)% (0.003)%
Net Losses/(Net Recoveries) as a Percent of Average
Principal Receivables Balance ..................... (0.00)% (0.00)% 0.12% 0.04% (0.00)% (0.01)% (0.01)%
Year Ended December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ----
(Dollars in millions)
Average Principal
Receivables Balance(1) ............................ $6,271 $5,344 $4,826 $4,726 $4,933 $4,129 $3,787
Net Losses/(Net Recoveries)(2) ...................... $ 12 $ 26 $ 36 $ 23 $ 13 $ 3 $ 2
Net Losses/(Net Recoveries) as a Percent of
Liquidations ...................................... 0.035% 0.098% 0.163% 0.117% 0.060% 0.015% 0.015%
Net Losses/(Net Recoveries) as a Percent of Average
Principal Receivables Balance ..................... 0.19% 0.49% 0.75% 0.49% 0.26% 0.07% 0.06%
S-13
Loss Experience for the U.S. Wholesale Portfolio (Continued)
Year Ended December 31,
---------------------------------------------------
1986 1985 1984 1983 1982 1981
---- ---- ---- ---- ---- ----
(Dollars in millions)
Average Principal Receivables Balance((1)) .......... $2,991 $2,532 $2,098 $1,461 $1,451 $1,390
Net Losses/(Net Recoveries)((2)) $ 3 $ 1 $ (2) $ 2 $ 14 $ 12
Net Losses/(Net Recoveries) as a Percent of
Liquidations ...................................... 0.023% 0.004% (0.019)% 0.023% 0.239% 0.225%
Net Losses/(Net Recoveries) as a Percent of Average
Principal Receivables Balance ..................... 0.10% 0.02% (0.09)% 0.12% 0.95% 0.85%
<FN>
- ----------------
(1) Average Principal Receivables Balance is the average of the month-end
principal balances for the thirteen months ending on the last day of
the period except for the three months ended March 31, 1999 and 1998
which are based on a four-month average.
(2) Net losses in any period are gross losses less recoveries for such
period.
(3) Percentages for the three months ended March 31, 1999 and 1998 are
expressed on an annualized basis.
Aging Experience
The following table provides the age distribution of vehicle inventory
for all dealers in the U.S. Wholesale Portfolio, as a percentage of total
principal outstanding at the date indicated. Because the Eligible Accounts
will only be a portion of the entire U.S. Wholesale Portfolio, actual age
distribution with respect to the Eligible Accounts may be different.
Age Distribution for the U.S. Wholesale Portfolio
As of
March 31, As of December 31,
----------- ----------------------------------------------------------------------------------------
Days 1999 1998 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
1-120 ........... 77.5% 76.0% 81.7% 80.1% 80.4% 82.2% 82.5% 82.4% 77.2% 75.9% 72.2% 71.3% 78.8% 73.0% 81.5%
121-180 ......... 11.5 12.1 11.0 10.8 10.0 9.3 10.1 9.6 13.8 12.9 13.7 14.5 11.0 13.9 9.2
181-270 ......... 8.6 8.4 4.1 4.2 5.0 3.8 4.0 4.6 4.8 4.8 7.1 6.4 4.7 6.8 4.4
over 270 ........ 2.4 3.5 3.2 4.9 4.6 4.7 3.4 3.4 4.2 6.4 7.0 7.8 5.5 6.3 4.9
Geographic Distribution
The following table provides the geographic distribution of the vehicle
inventory for all dealers in the Trust on the basis of receivables
outstanding and the number of dealers generating such portfolio.
Geographic Distribution of Accounts in the Trust
As of March 31, 1999
Percentage of Percentage of
Receivables Receivables Total Number of Number of
Outstanding (2) Outstanding (2)(4) Dealers (3) Dealers (3)(4)
--------------- ------------------ ----------- --------------
California ............... $ 760,753,484.34 8.27% 187 6.46%
Texas .................... 713,712,898.95 7.76 182 6.29
New York ................. 608,293,420.41 6.62 186 6.43
Illinois ................. 562,401,684.93 6.12 159 5.49
New Jersey ............... 516,055,330.99 5.61 133 4.60
Florida .................. 507,894,691.03 5.52 110 3.80
Michigan ................. 496,898,658.11 5.40 134 4.63
Other(1) ................. 5,029,548,335.12 54.70 1,803 62.30
----------------- ------ ----- ------
Total .................... $9,195,558,503.88 100.00% 2,894 100.00%
================= ====== ===== ======
<FN>
- ----------------
(1) No other state includes more than 5% of the outstanding Receivables.
(2) Includes Excluded Receivables.
(3) Includes Excluded Dealers.
(4) May not add to 100.00% due to rounding.
S-14
CHRYSLER FINANCIAL COMPANY L.L.C.
Certain information regarding Chrysler Financial Company L.L.C. and its
predecessor, Chrysler Financial Corporation, is set forth under "Chrysler
Financial Company L.L.C., Chrysler Financial Corporation and Chrysler Credit
Corporation" in the Prospectus. In addition, as of March 31, 1999, CFC had
nearly 3,600 employees and was managing $51.6 billion in finance receivables
and leases. During the first three months of 1999, CFC financed or leased
approximately 250,000 vehicles at retail, including approximately 196,000 new
Chrysler passenger cars and light duty trucks representing 30% of
DaimlerChrysler's U.S. retail and fleet deliveries. CFC also financed at
wholesale approximately 486,000 new Chrysler passenger cars and light duty
trucks representing 68% of DaimlerChrysler's U.S. factory unit sales for the
three months ended March 31, 1999. Wholesale vehicle financing accounted for
72% of the total automotive financing volume of CFC in the first three months
of 1999 and represented 27% of net automotive finance receivables and leases
outstanding at March 31, 1999.
MATURITY AND PRINCIPAL PAYMENT CONSIDERATIONS
Principal with respect to the Series 1999-2 Certificates will be
payable if an Early Amortization Period that is not terminated has commenced.
Full amortization of the Class A-1 Certificates by the May 2002 Distribution
Date (the "Class A-1 Expected Payment Date") and of the Class A-2
Certificates by the May 2004 Distribution Date (the "Class A-2 Expected
Payment Date") depends on, among other things, repayment by Dealers of the
Receivables and may not occur if Dealer payments are insufficient. Because
the Receivables generally are paid upon retail sale of the underlying
Vehicle, the timing of such payments is uncertain. In addition, there is no
assurance that CFC will generate additional Receivables under the Accounts or
that any particular pattern of Dealer payments will occur. In addition, the
shorter the Class A-1 Accumulation Period Length or the Class A-2
Accumulation Period Length the greater the likelihood that payment of the
Class A-1 Certificates in full by the Class A-1 Expected Payment Date or the
Class A-2 Certificates in full by the Class A-2 Expected Payment Date, as
applicable, will be dependent on the reallocation of Principal Collections
which are initially allocated to other outstanding Series. If one or more
other Series from which Principal Collections are expected to be available to
be reallocated to the payment of the Class A-1 Certificates enters into an
early amortization period or reinvestment period after the November 2001
Distribution Date, Principal Collections allocated to such Series generally
will not be available to be reallocated to make payments of principal of the
Class A-1 Certificates and the final payment of principal of the Class A-1
Certificates may be later than the Class A-1 Expected Payment Date. If one or
more other Series from which Principal Collections are expected to be
available to be reallocated to the payment of the Class A-2 Certificates
enters into an early amortization period or reinvestment period after the
November 2003 Distribution Date, Principal Collections allocated to such
Series generally will not be available to be reallocated to make payments of
principal of the Class A-2 Certificates and the final payment of principal of
the Class A-2 Certificates may be later than the Class A-2 Expected Payment
Date.
Because an Early Amortization Event with respect to the Series 1999-2
Certificates may occur which would initiate an Early Amortization Period, the
final distribution of principal on the Class A-1 Certificates may be made
prior to the scheduled termination of the Class A-1 Revolving Period or prior
to the Class A-1 Expected Payment Date and the final distribution of
principal on the Class A-2 Certificates may be made prior to the scheduled
termination of the Class A-2 Revolving Period or prior to the Class A-2
Expected Payment Date.
The amount of new Receivables generated in any month and monthly
payment rates on the Receivables may vary because of seasonal variations in
Vehicle sales and inventory levels, retail incentive programs provided by
Vehicle manufacturers and various economic factors affecting Vehicle sales
generally. The following table sets forth the highest and lowest monthly
payment rates for the U.S. Wholesale Portfolio during any month in the
periods shown and the average of the monthly payment rates for all months
during the periods shown, in each case calculated as the percentage
equivalent of a fraction, the numerator of which is the aggregate of all
collections of principal during the period and the
S-15
denominator of which is the average aggregate principal balance for such
period. Monthly payment rates reflected in the table include principal credit
adjustments. The monthly payment rates presented for 1981 through 1985 are
calculated using quarterly data while monthly payment rates for 1986 through
March of 1999 reflect actual monthly data. There can be no assurance that the
rate of Principal Collections will be similar to the historical experience
set forth below. As the Eligible Accounts will be only a portion of the
entire U.S. Wholesale Portfolio, historical monthly payment rates with
respect to the Eligible Accounts may be different than those shown below.
Monthly Payment Rates for the U.S. Wholesale Portfolio
Three Months
Ended March 31, Year Ended December 31,
--------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Highest Month ............ 57.3% 47.0% 60.8% 57.7% 58.3% 59.1% 59.7% 54.7% 50.6% 49.0%
Lowest Month ............. 45.4 42.5 42.5 41.1 43.2 36.5 34.2 35.9 34.4 30.2
Average of the Months in
the Period ............. 50.7 44.2 50.0 48.2 49.0 45.6 50.3 46.6 41.3 38.4
Year Ended December 31,
-------------------------------------------------------------------
1990 1989 1988 1987 1986 1985 1984 1983 1982 1981
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Highest Month ............ 42.1% 41.5% 48.7% 40.3% 56.7% 45.9% 43.7% 45.9% 35.5% 34.3%
Lowest Month ............. 25.3 29.5 29.5 26.8 27.7 35.8 35.7 37.7 29.0 27.4
Average of the Months in
the Period ............. 35.7 35.6 41.2 34.2 37.7 40.1 39.9 42.2 32.9 32.2
SERIES PROVISIONS
General
The Series 1999-2 Certificates will be issued pursuant to the Pooling
and Servicing Agreement and a Series Supplement relating to the Series 1999-2
Certificates (the "Series Supplement"). The Series 1999-2 Certificates will
consist of two Classes, the Class A-1 Certificates and the Class A-2
Certificates. Beneficial interests in Series 1999-2 Certificates will be
offered in minimum denominations of $1,000 and integral multiples of that
amount. The Trustee will make available for inspection a copy of the Pooling
and Servicing Agreement (without exhibits or schedules) on request. Reference
should be made to the Prospectus for additional information concerning the
Series 1999-2 Certificates and the Pooling and Servicing Agreement.
Interest
Interest on the principal balance of the Class A-1 Certificates and the
Class A-2 Certificates will accrue at the Class A-1 Certificate Rate and the
Class A-2 Certificate Rate, respectively, and will be payable to the Series
1999-2 Certificateholders on each Distribution Date, commencing June 15,
1999. Interest payable on any Distribution Date will accrue from and
including the preceding Distribution Date to but excluding such Distribution
Date (or, in the case of the June 1999 Distribution Date, from and including
the Series Issuance Date to but excluding the June 1999 Distribution Date).
Interest will be calculated on a basis of the actual number of days in each
Interest Period divided by 360. Interest due for any Distribution Date but
not paid on such Distribution Date will be due on the next Distribution Date,
together with interest on such amount at the applicable Certificate Rate
calculated on the basis of LIBOR, to the extent permitted by applicable law.
Interest payments on the Series 1999-2 Certificates will generally be derived
from Certificateholder Interest Collections for a Collection Period, any
withdrawals from the Reserve Fund, Investment Proceeds and, under certain
circumstances, Available Seller's Collections to the extent of the Available
Subordinated Amount and any withdrawals from the Yield Supplement Account.
S-16
The Class A-1 Certificate Rate and the Class A-2 Certificate Rate for
each Interest Period will be determined on the LIBOR Determination Date
preceding such Interest Period. The "Class A-1 Certificate Rate" will be
equal to the lesser of (a) LIBOR plus 0.07% and (b) the Assets Receivables
Rate for the related Distribution Date; and the "Class A-2 Certificate Rate"
will be equal to the lesser of (a) LIBOR plus 0.13% and (b) the Assets
Receivables Rate for the related Distribution Date.
"Class A-1 Monthly Interest" for any Distribution Date means the amount
of interest accrued in respect of the Class A-1 Certificates as described
above for such Distribution Date; and "Class A-2 Monthly Interest" for any
Distribution Date means the amount of interest accrued in respect of the
Class A-2 Certificates as described above for such Distribution Date. Class
A-1 Monthly Interest and Class A-2 Monthly Interest are referred to
collectively as "Monthly Interest".
"LIBOR" with respect to any Interest Period will be established by the
Calculation Agent and will equal the offered rate for United States dollar
deposits for one month that appears on Telerate Page 3750 as of 11:00 A.M.,
London time, on the second LIBOR Business Day prior to such Interest Period
(a "LIBOR Determination Date"). "Telerate Page 3750" means the display page
so designated on the Dow Jones Telerate Service (or such other page as
may replace that page on that service, or such other service as may be
nominated as the information vendor, for the purpose of displaying London
interbank offered rates of major banks). If such rate appears on Telerate
Page 3750, LIBOR will be such rate. "LIBOR Business Day" as used herein means
a day that is both a Business Day and a day on which banking institutions in
the City of London, England are not required or authorized by law to be
closed. If on any LIBOR Determination Date the offered rate does not appear
on Telerate Page 3750, the Calculation Agent will request each of the
reference banks (which shall be major banks that are engaged in transactions
in the London interbank market selected by the Calculation Agent) to provide
the Calculation Agent with its offered quotation for United States dollar
deposits for one month to prime banks in the London interbank market as of
11:00 A.M., London time, on such date. If at least two reference banks
provide the Calculation Agent with such offered quotations, LIBOR on such
date will be the arithmetic mean, rounded upwards, if necessary, to the
nearest 1/100,000 of 1% (.0000001), with five one-millionths of a percentage
point rounded upward, of all such quotations. If on such date fewer than two
of the reference banks provide the Calculation Agent with such offered
quotations, LIBOR on such date will be the arithmetic mean, rounded upwards,
if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward, of the offered per annum
rates that one or more leading banks in The City of New York selected by the
Calculation Agent are quoting as of 11:00 A.M., New York City time, on such
date to leading European banks for United States dollar deposits for one
month; provided, however, that if such banks are not quoting as described
above, LIBOR for such date will be LIBOR applicable to the Interest Period
immediately preceding such Interest Period. The "Calculation Agent" will be
the Trustee.
If the Class A-1 Certificate Rate or the Class A-2 Certificate Rate for
a Distribution Date calculated on the basis of LIBOR as described above is
greater than the Assets Receivable Rate, then the Certificate Rate for such
Distribution Date and such Class will be the Assets Receivables Rate.
The "Assets Receivables Rate" for any Interest Period shall equal the
product of (a) the quotient obtained by dividing (i) 360 by (ii) the actual
number of days elapsed in such period and (b) a percentage, expressed as a
fraction, (i) the numerator of which is the sum of (A) Certificateholder
Interest Collections for the Collection Period immediately preceding the last
day of such period (which for this purpose only is based on interest amounts
billed to the Dealers which are due during such Collection Period) less the
Monthly Servicing Fee with respect to such immediately preceding Collection
Period, to the extent not waived by the Servicer, and (B) the Investment
Proceeds to be applied on the Distribution Date related to such period and
(ii) the denominator of which is the sum of (A) the product of (I) the
Floating Allocation Percentage, (II) the Series Allocation Percentage and
(III) the average Pool Balance (after giving effect to any charge-offs) for
such immediately preceding Collection Period, (B) the principal balance on
deposit in the Excess Funding Account on the first day of such period (after
giving effect to all deposits to and withdrawals therefrom on such first day)
and (C) the principal balance on deposit in the Principal Funding Account on
the first day of such period (after giving effect to all deposits to and
withdrawals therefrom on such first day).
S-17
If the Class A-1 Certificate Rate or the Class A-2 Certificate Rate for
any Distribution Date is based on the Assets Receivables Rate, the excess of
(a) the amount of interest on the Class A-1 Certificates or the Class A-2
Certificates, as the case may be, that would have accrued in respect of the
related Interest Period had interest on that Class been calculated based on
LIBOR, over (b) the amount of interest on the Class A-1 Certificates or the
Class A-2 Certificates, as the case may be, actually accrued in respect of
such Interest Period based on the Assets Receivables Rate (such excess,
together with the unpaid portion of any such excess from prior Distribution
Dates (and interest accrued thereon calculated on the basis of LIBOR), is
referred to as the "Class A-1 Carry-over Amount" or the "Class A-2 Carry-over
Amount", as applicable), will be paid on such Distribution Date from amounts
on deposit in the Yield Supplement Account and, if such amounts are depleted,
to the extent funds are allocated and available therefor after making all
required distributions and deposits with respect to the Series 1999-2
Certificates, including payments with respect to principal (including
payments to the Excess Funding Account), Monthly Interest, the Monthly
Servicing Fee, the Reserve Fund Deposit Amount and the Investor Default
Amount as described below under "Distributions from the Collection Account;
Reserve Fund; Yield Supplement Account". In addition, any Class A-1
Carry-over Amount outstanding on the Class A-1 Final Payment Date and any
Class A-2 Carry-over Amount outstanding on the Class A-2 Final Payment Date,
after making the distributions described in the preceding sentence, will be
paid on such Class A-1 Final Payment Date or Class A-2 Final Payment Date, as
applicable, from (i) certain amounts on deposit in the Reserve Fund (to the
extent such amounts would otherwise be available to the Seller) and (ii)
Available Seller's Collections on deposit in the Collection Account
(to the extent such amounts would otherwise be available to the Seller) as
described under "Series Provisions -- Distributions from the Collection
Account; Reserve Fund; Yield Supplement Account". The rating of the Series
1999-2 Certificates does not address the likelihood of payment of any
Carry-over Amount.
Principal
In general, no principal payments will be made to the Class A-1
Certificateholders until the Class A-1 Expected Payment Date or, upon the
commencement of an Early Amortization Period that is not terminated as
described herein, until the first Special Payment Date, and no principal
payments will be made to the Class A-2 Certificateholders until the Class A-2
Expected Payment Date or, upon the commencement of an Early Amortization
Period that is not terminated as described herein, until the first Special
Payment Date. On each Distribution Date with respect to the Class A-1
Revolving Period or the Class A-2 Revolving Period, collections of Principal
Receivables allocable to the interest of the Class A-1 Certificateholders in
the Trust Assets (the "Class A-1 Certificateholders' Interest") or the
interest of the Class A-2 Certificateholders in the Trust Assets (the "Class
A-2 Certificateholders's Interest" and, together with the Class A-1
Certificateholders' Interest, the "Series 1999-2 Certificateholders'
Interest"), as applicable, that are not required to be deposited to the
Excess Funding Account, subject to certain limitations, will either be (a)
allocated to one or more Series which are in amortization, early amortization
or accumulation periods to cover principal payments due to the
Certificateholders of any such Series or which provides for excess funding
accounts or similar arrangements or (b) if no such Series is then amortizing
or accumulating principal or otherwise does not provide for excess funding
accounts or similar arrangements, paid to the Seller to maintain the Series
1999-2 Certificateholders' Interest or held as Unallocated Principal
Collections. See "Allocation Percentages -- Principal Collections for all
Series" and "Distributions from the Collection Account; Reserve Fund; Yield
Supplement Account -- Principal Collections".
The "Class A-1 Revolving Period" shall mean the period beginning at the
close of business on the Series Cut-Off Date and terminating on the earlier
of (a) the close of business on the day immediately preceding the Class A-1
Accumulation Period Commencement Date and (b) the close of business on the
day an Early Amortization Period commences; provided, however, that the
Revolving Period may recommence in certain circumstances upon the termination
of an Early Amortization Period. See "Early Amortization Events". The "Class
A-2 Revolving Period" shall mean the period beginning at the close of
business on the Series Cut-Off Date and terminating on the earlier of (a) the
close of business on the
S-18
day immediately preceding the Class A-2 Accumulation Period Commencement Date
and (b) the close of business on the day an Early Amortization Period
commences; provided, however, that the Revolving Period may recommence in
certain circumstances upon the termination of an Early Amortization Period.
See "Early Amortization Events".
Unless an Early Amortization Period that is not terminated as described
herein shall have commenced, the Class A-1 Certificates will have an
Accumulation Period of one, two, three, four or five month(s) long as
described in the following paragraph.
On the November 2001 Distribution Date and each Distribution Date
thereafter that occurs prior to the Class A-1 Accumulation Period
Commencement Date, the Servicer shall calculate the Class A-1 Accumulation
Period Length. The "Class A-1 Accumulation Period Length" will be calculated
on each such date as the lesser of (i) the number of full Collection Periods
between such Distribution Date and the Class A-1 Expected Payment Date and
(ii) the product, rounded upwards to the nearest integer not greater than
five, of (a) one divided by the lowest Monthly Payment Rate on the
Receivables during the last 12 months and (b) a fraction, the numerator of
which is the sum of (i) the Class A-1 Invested Amount as of such Distribution
Date (after giving effect to all changes therein on such date) and (ii) the
invested amounts of all other Series (excluding certain Series) currently in
their amortization or accumulation periods or expected to be in their
amortization or accumulation periods by the Class A-1 Expected Payment Date
and the denominator of which is the sum of the Series 1999-2 Invested Amount
and the invested amounts as of such Distribution Date (after giving effect to
all changes therein on such date) of all other outstanding Series (excluding
certain Series) which are expected to be outstanding on the Class A-1
Expected Payment Date.
The Class A-1 Accumulation Period Commencement Date (which will be the
first day of a Collection Period) will occur when the number of full
Collection Periods remaining until the Class A-1 Expected Payment Date first
equals the Class A-1 Accumulation Period Length as calculated above. If the
Class A-1 Accumulation Period Length is one month, two months, three months,
four months or five months in length, the "Class A-1 Accumulation Period
Commencement Date" shall be the first day of the April 2002 Collection
Period, the March 2002 Collection Period, the February 2002 Collection
Period, the January 2002 Collection Period, or the December 2001 Collection
Period, respectively. In addition, if at any time after the November 2001
Distribution Date, any other outstanding Series (excluding certain Series)
shall have entered into a reinvestment period or an early amortization
period, the Class A-1 Accumulation Period Commencement Date shall be the
earlier of (i) the date that such outstanding Series shall have entered into
its reinvestment period or early amortization period and (ii) the Class A-1
Accumulation Period Commencement Date as previously determined. See "Annex I
- -- Outstanding Series of Investor Certificates".
The effect of the calculation described above is to permit the
reduction of the length of the Class A-1 Accumulation Period based on the
invested amounts of certain other Series which are scheduled to be in their
revolving periods during the Class A-1 Accumulation Period and on increases
in the principal payment rate, which, if continued, would result in a shorter
Class A-1 Accumulation Period.
Unless and until an Early Amortization Period that is not terminated as
described herein shall have occurred and until the outstanding principal
balance of the Class A-1 Certificates is paid in full, on each Distribution
Date with respect to the Class A-1 Accumulation Period, collections of
Principal Receivables allocable to the Class A-1 Certificateholders' Interest
plus certain other amounts comprising Class A-1 Monthly Principal will no
longer be paid for the benefit of another Series or to the Seller as
described above but instead an amount thereof up to the Class A-1 Controlled
Deposit Amount for each such Distribution Date will be deposited in the
Principal Funding Account. The funds deposited in the Principal Funding
Account and any amounts in the Excess Funding Account allocable to the Class
A-1 Certificates will be used to pay the outstanding principal balance of the
Class A-1 Certificates on the Class A-1 Expected Payment Date. If on such
date the sum of the Principal Funding Account Balance and any such amounts in
the Excess Funding Account is less than the outstanding principal balance of
the Class A-1 Certificates, the Early Amortization Period will commence and
on each Special Payment
S-19
Date the Series 1999-2 Certificateholders will receive distributions of Class
A-1 Monthly Principal, Class A-2 Monthly Principal and Monthly Interest until
the outstanding principal balance of the Series 1999-2 Certificates has been
paid in full or the applicable Class Termination Date has occurred. Even if
the sum of the Principal Funding Account Balance and any such amounts in the
Excess Funding Account on the Class A-1 Expected Payment Date is insufficient
to pay the outstanding principal balance of the Class A-1 Certificates in
full, such balances will be distributed to the Class A-1 Certificateholders
at such time.
Unless an Early Amortization Period that is not terminated as described
herein shall have commenced, the Class A-2 Certificates will have an
Accumulation Period of one, two, three, four or five month(s) long as
described in the following paragraph.
On the November 2003 Distribution Date and each Distribution Date
thereafter that occurs prior to the Class A-2 Accumulation Period
Commencement Date, the Servicer shall calculate the Class A-2 Accumulation
Period Length. The "Class A-2 Accumulation Period Length" will be calculated
on each such date as the lesser of (i) the number of full Collection Periods
between such Distribution Date and the Class A-2 Expected Payment Date and
(ii) the product, rounded upwards to the nearest integer not greater than
five, of (a) one divided by the lowest Monthly Payment Rate on the
Receivables during the last 12 months and (b) a fraction, the numerator of
which is the sum of (i) the Class A-2 Invested Amount as of such Distribution
Date (after giving effect to all changes therein on such date) and (ii) the
invested amounts of all other Series (excluding certain Series) currently in
their amortization or accumulation periods or expected to be in their
amortization or accumulation periods by the Expected Class A-2 Payment Date
and the denominator of which is the sum of such Invested Amount and the
invested amounts as of such Distribution Date (after giving effect to all
changes therein on such date) of all other outstanding Series (excluding
certain Series) which are expected to be outstanding on the Class A-2
Expected Payment Date.
The Class A-2 Accumulation Period Commencement Date (which will be the
first day of a Collection Period) will occur when the number of full
Collection Periods remaining until the Class A-2 Expected Payment Date first
equals the Class A-2 Accumulation Period Length as calculated above. If the
Class A-2 Accumulation Period Length is one month, two months, three months,
four months or five months in length, the "Class A-2 Accumulation Period
Commencement Date" shall be the first day of the April 2004 Collection
Period, the March 2004 Collection Period, the February 2004 Collection
Period, the January 2004 Collection Period, or the December 2003 Collection
Period, respectively. In addition, if at any time after the November 2003
Distribution Date, any other outstanding Series (excluding certain Series)
shall have entered into a reinvestment period or an early amortization
period, the Class A-2 Accumulation Period Commencement Date shall be the
earlier of (i) the date that such outstanding Series shall have entered into
its reinvestment period or early amortization period and (ii) the Class A-2
Accumulation Period Commencement Date as previously determined. See "Annex I
- -- Outstanding Series of Investor Certificates".
The effect of the calculation described above is to permit the
reduction of the length of the Class A-2 Accumulation Period based on the
invested amounts of certain other Series which are scheduled to be in their
revolving periods during the Class A-2 Accumulation Period and on increases
in the principal payment rate, which, if continued, would result in a shorter
Class A-2 Accumulation Period.
Unless and until an Early Amortization Period that is not terminated as
described herein shall have occurred and until the outstanding principal
balance of the Class A-2 Certificates is paid in full, on each Distribution
Date with respect to the Class A-2 Accumulation Period, collections of
Principal Receivables allocable to the Class A-2 Certificateholders' Interest
plus certain other amounts comprising Class A-2 Monthly Principal will no
longer be paid for the benefit of another Series or to the Seller as
described above but instead an amount thereof up to the Class A-2 Controlled
Deposit Amount for each such Distribution Date will be deposited in the
Principal Funding Account. The funds deposited in the Principal Funding
Account and any amounts in the Excess Funding Account allocable to the Class
A-2 Certificates will be used to pay the outstanding principal balance of the
Class A-2 Certificates on the Class A-2 Expected Payment Date. If on such
date the sum of the Principal Funding Account Balance and any such amounts in
the Excess Funding Account is less than the outstanding principal balance of
S-20
the Class A-2 Certificates, the Early Amortization Period will commence and
on each Special Payment Date the Class A-2 Certificateholders will receive
distributions of Class A-2 Monthly Principal and Class A-2 Monthly Interest
until the outstanding principal balance of the Class A-2 Certificates has
been paid in full or the Class A-2 Termination Date has occurred. Even if the
sum of the Principal Funding Account Balance and any such amounts in the
Excess Funding Account on the Class A-2 Expected Payment Date is insufficient
to pay the outstanding principal balance of the Class A-2 Certificates in
full, such balances will be distribute to the Class A-2 Certificateholders at
such time.
It is expected that the final principal payment with respect to the
Class A-1 Certificates will be made on the Class A-1 Expected Payment Date
and that the final principal payment with respect to the Class A-2
Certificates will be made on the Class A-2 Expected Payment Date. However,
principal of the Class A-1 Certificates or the Class A-2 Certificates may be
paid earlier or, depending on the actual payment rate on the Receivables,
later, as described under "Risk Factors-Timing of Payments" herein and "Risk
Factors-Payments" in the Prospectus.
Excess Funding Account
Unless and until an Early Amortization Event shall have occurred, the
Excess Funded Amount will be maintained in the Excess Funding Account
established with the Trustee. The Excess Funded Amount will initially equal
the excess of the initial principal balance of the Series 1999-2
Certificates, if any, over the Initial Invested Amount. Funds on deposit in
the Excess Funding Account will be invested by the Trustee at the direction
of the Servicer generally in Eligible Investments. Such investments must
mature on or prior to the next Distribution Date.
Funds on deposit in the Excess Funding Account will be withdrawn and
paid to the Seller or allocated to one or more Series which are in
amortization, early amortization or accumulation periods to the extent of any
increases in the Invested Amount as a result of the addition of Receivables
to the Trust, a reduction in the Seller's Interest, or a reduction in the
initial invested amount of any other Series. Additional amounts will be
deposited in the Excess Funding Account on a Distribution Date to the extent
that the sum of the Series 1999-2 Certificateholders' Interest in Principal
Receivables (determined for this purpose by reducing such interest by the
amount, if any, by which the Required Participation Amount exceeds the Pool
Balance due to an increase in the Subordination Factor) and the amount on
deposit in the Excess Funding Account prior to the deposit on such
Distribution Date is less than the outstanding principal balance of the
Series 1999-2 Certificates, but only to the extent that funds are available
therefor as described herein. In the event that other Series issued by the
Trust provide for excess funding accounts or other arrangements similar to
the Excess Funding Account involving fluctuating levels of investment in the
Receivables, the allocation of additional Receivables to increase the
Invested Amount will generally be based on the proportion that the amount on
deposit in the Excess Funding Account bears to the amounts on deposit in the
excess funding accounts of all Series providing for excess funding accounts
or such similar arrangements or to amounts otherwise similarly
available; and the deposit of amounts in the Excess Funding Account will be
based on the proportion that the Adjusted Invested Amount bears to the
adjusted invested amounts of all Series providing for excess funding accounts
or such similar arrangements.
On each Distribution Date, all investment income received on amounts in
the Excess Funding Account during the related Collection Period will be
withdrawn from the Excess Funding Account and applied as described herein.
Any funds on deposit in the Excess Funding Account on the November 2001
Distribution Date and allocable to the holders of Class A-1 Certificates
(based on a fraction the numerator of which is the initial principal amount
of the Class A-1 Certificates and the denominator of which is the aggregate
initial principal amount of the Series 1999-2 Certificates) will be deposited
in the Principal Funding Account on such date. In addition, on the November
2003 Distribution Date the amount on deposit in the Excess Funding Account
will be deposited in the Principal Funding Account. No funds will be
deposited in the Excess Funding Account during any Early Amortization Period.
Additionally, no amounts will be deposited in the Excess Funding Account (i)
with respect to the Class A-1 Certificates, with respect to
S-21
any Collection Period following the September 2001 Collection Period or (ii)
with respect to the Class A-2 Certificates, with respect to any Collection
Period following the September 2003 Collection Period.
Allocation Percentages
Allocation between the Series 1999-2 Certificateholders and the Seller.
The Servicer will allocate amounts initially allocated to Series 1999-2 as
described under "Description of the Certificates -- Allocation Percentages --
Allocations among Series" in the Prospectus between the Series 1999-2
Certificateholders' Interest and the Seller's Interest for each Collection
Period as follows:
(i) Series Allocable Interest Collections and the Series Allocable
Defaulted Amount will be allocated to Series 1999-2 Certificateholders
based on the Floating Allocation Percentage;
(ii) during any period that is not the Class A-1 Accumulation
Period, the Class A-2 Accumulation Period or an Early Amortization
Period (a "Nonprincipal Period"), Series Allocable Principal
Collections will be allocated to Series 1999-2 Certificateholders based
on the Floating Allocation Percentage;
(iii) during the Class A-1 Accumulation Period, the Class A-2
Accumulation Period and any Early Amortization Period, Series Allocable
Principal Collections will be allocated to Series 1999-2
Certificateholders based on the Principal Allocation Percentage; and
(iv) Series Allocable Miscellaneous Payments will at all times be
allocated to Series 1999-2 Certificateholders.
Amounts not allocated to the Series 1999-2 Certificateholders as
described above will be allocated to the Seller.
"Floating Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the Invested Amount as of the last day of the
immediately preceding Collection Period and the denominator of which is the
product of (x) the Pool Balance as of such last day and (y) the Series
Allocation Percentage for the Collection Period in respect of which the
Floating Allocation Percentage is being calculated; provided, however, that,
with respect to the first Collection Period, the Floating Allocation
Percentage shall mean the percentage equivalent of a fraction, the numerator
of which is the Initial Invested Amount as of the Series Issuance Date and
the denominator of which is the Series Allocation Percentage of the Pool
Balance as of the Series Cut-Off Date.
"Principal Allocation Percentage" for any Collection Period generally
means the percentage equivalent (which shall never exceed 100%) of a
fraction, the numerator of which is the sum of (x) the Class A-1 Invested
Amount as of the last day of the Class A-1 Revolving Period, if such last day
has occurred or, if such last day has not occurred, as of the last day of the
immediately preceding Collection Period, or, after the Class A-1 Certificates
have been paid in full, zero and (y) the Class A-2 Invested Amount as of the
last day of the Class A-2 Revolving Period, if such last day has occurred or,
if such last day has not occurred, as of the last day of the immediately
preceding Collection Period and the denominator of which is the product of
(x) the Pool Balance as of such last day and (y) the Series Allocation
Percentage for the Collection Period in respect of which the Principal
Allocation Percentage is being calculated.
"Invested Amount" means for any date an amount equal to the sum of the
Class A-1 Invested Amount and the Class A-2 Invested Amount.
"Class A-1 Invested Amount" means for any date an amount equal to the
Class A-1 Initial Invested Amount, minus the amount, without duplication, of
principal payments (except principal payments made from the Excess Funding
Account) made to Class A-1 Certificateholders or deposited to the Principal
Funding Account in respect of the Class A-1 Certificates prior to such date
since the Series Issuance Date other than any such payments made to holders
of Class A-1 Certificates that have been paid in full, minus the excess, if
any, of the aggregate amount of Class A-1 Investor Charge-Offs for all
Distribution
S-22
Dates preceding such date, over the aggregate amount of any reimbursements of
Class A-1 Investor Charge-Offs for all Distribution Dates preceding such
date.
"Class A-2 Invested Amount" means for any date an amount equal to the
Class A-2 Initial Invested Amount, minus the amount, without duplication, of
principal payments (except principal payments made form the Excess Funding
Account) made to Class A-2 Certificateholders or deposited to the Principal
Funding Account in respect of the Class A-2 Certificates prior to such date
since the Series Issuance Date minus the excess, if any, of aggregate amount
of Class A-2 Investor Charge-Offs for all Distribution Dates preceding such
date, over the aggregate amount of any reimbursements of Class A-2 Investor
Charge-Offs for all Distribution Dates preceding such date.
"Initial Invested Amount" means the sum of the Class A-1 Initial
Invested Amount and the Class A-2 Initial Invested Amount.
"Class A-1 Initial Invested Amount" means the portion of the initial
principal amount of the Class A-1 Certificates which is invested in Principal
Receivables on the Series Issuance Date, which is expected to equal
approximately $750,000,000 (based on information as of the Series Cut-off
Date), plus (x) the product of the Class A-1 Allocation Percentage and the
amount of any withdrawals from the Excess Funding Account in connection with
the purchase of an additional interest in Principal Receivables since the
Series Issuance Date, minus (y) the product of the Class A-1 Allocation
Percentage and the amount of any additions to the Excess Funding Account in
connection with a reduction in the Principal Receivables in the Trust or an
increase in the Subordination Factor since the Series Issuance Date, minus
(z) principal payments (except principal payments made from the Excess
Funding Account) made to the holders of any Class A-1 Certificates that have
been paid in full.
"Class A-2 Initial Invested Amount" means the portion of the initial
principal amount of the Class A-2 Certificates which is invested in Principal
Receivables on the Series Issuance Date, which is expected to equal
approximately $600,000,000 (based on information as of the Series Cut-off
Date), plus (x) the product of the Class A-2 Allocation Percentage and the
amount of any withdrawals from the Excess Funding Account in connection with
the purchase of an additional interest in Principal Receivables since the
Series Issuance Date, minus (y) the product of the Class A-2 Allocation
Percentage and the amount of any additions to the Excess Funding Account in
connection with a reduction in the Principal Receivables in the Trust or an
increase in the Subordination Factor.
The Floating Allocation Percentage and the Principal Allocation
Percentage will be adjusted for any Collection Period in which Additional
Accounts are designated to reflect the additional Receivables added to the
Trust.
Allocation Between the Class A-1 Certificateholders and the Class A-2
Certificateholders. The Servicer will allocate Available Certificateholder
Principal Collections between the interest of holders of the Class A-1
Certificates and the interest of holders of the Class A-2 Certificates for
each Collection Period based on their respective Certificate Principal
Percentages.
"Available Certificateholder Principal Collections" for any
Distribution Date means the sum of (a) the product of (i) the Floating
Allocation Percentage, with respect to any Nonprincipal Period, or the
Principal Allocation Percentage, with respect to the Class A-1 Accumulation
Period, the Class A-2 Accumulation Period or any Early Amortization Period,
for the related Collection Period and (ii) Series Allocable Principal
Collections deposited in the Collection Account for the related Collection
Period, (b) the amount, if any, of Interest Collections, Investment Proceeds,
funds in the Reserve Fund, Available Seller's Collections and Excess
Servicing allocated to cover the Investor Default Amount or reimburse
Investor Charge-Offs, (c) Series Allocable Miscellaneous Payments on deposit
in the Collection Account for such Distribution Date and (d) Excess Principal
Collections, if any, from other Series allocated to Series 1999-2.
"Certificate Principal Percentage" means (a) for any Collection Period
and the Class A-1 Certificates, the percentage equivalent (which shall never
exceed 100%) of a fraction, the numerator of which is the Class A-1 Invested
Amount as of the last day of the Class A-1 Revolving Period if such last
S-23
day has occurred or, if such last day has not occurred, as of the last day of
the immediately preceding Collection Period and the denominator of which is
the sum of (i) the Class A-1 Invested Amount as of the last day of the Class
A-1 Revolving Period if such last day has occurred or, if such last day has
not occurred, as of the last day of the immediately preceding Collection
Period and (ii) the Class A-2 Invested Amount as of the last day of the Class
A-2 Revolving Period, if such last day has occurred, or if such last day has
not occurred, as of the last day of the immediately preceding Collection
Period, provided that after the Class A-1 Certificates have been paid in full
the Certificate Principal Percentage with respect thereto shall be zero; and
(b) for any Collection Period and the Class A-2 Certificates in the
aggregate, 100% minus the Certificate Principal Percentage for the Class A-1
Certificates.
Principal Collections for all Series
Principal Collections allocated to the Class A-1 Certificateholders' Interest
for any Collection Period will first be allocated to make required deposits to
the Excess Funding Account during the Class A-1 Revolving Period and to make
required payments of principal to the Principal Funding Account during the
Class A-1 Accumulation Period and to the Series 1999-2 Certificateholders
during any Early Amortization Period. Principal Collections allocated to the
Class A-2 Certificateholders' Interest for any Collection Period will first be
allocated to make required deposits to the Excess Funding Account during the
Class A-2 Revolving Period and to make required deposits of principal to the
Principal Funding Account during the Class A-2 Accumulation Period and to the
Series 1999-2 Certificateholders during any Early Amortization Period. See
"Distributions from the Collection Account; Reserve Fund; Yield Supplement
Account -- Principal Collections". The Servicer will allocate Excess
Principal Collections to cover any principal distributions to
Certificateholders for any Series entitled thereto which are either scheduled
or permitted and which have not been covered out of Principal Collections and
certain other amounts allocated to such Series ("Principal Shortfalls"). See
"Maturity and Principal Payment Considerations". Excess Principal Collections
will generally not be used to cover investor charge-offs for any Series. If
Principal Shortfalls exceed Excess Principal Collections for any Collection
Period, Excess Principal Collections will be allocated pro rata among the
applicable Series based on the relative amounts of Principal Shortfalls.
Allocation of Collections; Limited Subordination of Seller's Interest
On any date on which collections are deposited in the Collection
Account, the Servicer will distribute directly to the Seller an amount equal
to (a) the Excess Seller's Percentage for the related Collection Period of
Series Allocable Interest Collections for such date and (b) the Excess
Seller's Percentage for the related Collection Period of Series Allocable
Principal Collections for such date, if the Seller's Participation Amount
(determined after giving effect to any Principal Receivables transferred to
the Trust on such date) exceeds the Trust Available Subordinated Amount for
the immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the
Distribution Date immediately following such Determination Date). In
addition, during any Nonprincipal Period, subject to certain limitations, the
Servicer will distribute directly to the Seller on each such date of deposit
an amount equal to the Available Seller's Principal Collections for such
date, if the Seller's Participation Amount (determined after giving effect to
any Principal Receivables transferred to the Trust on such date) exceeds the
Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Distribution Date immediately
following such Determination Date).
"Available Seller's Collections" for any date means the sum of (a) the
Available Seller's Interest Collections for such date and (b) the Available
Seller's Principal Collections for such date; provided, however, that the
Available Seller's Collections will be zero for any Collection Period with
respect to which the Available Subordinated Amount is zero on the
Determination Date immediately following the end of such Collection Period.
"Available Seller's Interest Collections" for any date means an amount
equal to the result obtained by multiplying (a) the excess of (i) the
Seller's Percentage for the related Collection Period over (ii) the Excess
Seller's Percentage for such Collection Period by (b) Series Allocable
Interest Collections for such date.
S-24
"Available Seller's Principal Collections" for any date means an amount
equal to the product of (a) the excess of (i) the Seller's Percentage for the
related Collection Period over (ii) the Excess Seller's Percentage for such
Collection Period and (b) Series Allocable Principal Collections for
such date.
"Seller's Percentage" means 100% minus (a) the Floating Allocation
Percentage, when used with respect to Interest Collections, Defaulted
Receivables and Principal Collections during any Nonprincipal Period, and (b)
the Fixed Allocation Percentage, when used with respect to Principal
Collections during the Accumulation Period and any Early Amortization Period.
"Excess Seller's Percentage" for any Collection Period means a
percentage (which percentage shall never be less than 0% nor more than 100%)
equal to (a) 100% minus, when used with respect to Interest Collections and
Principal Collections during any Nonprincipal Period, the sum of (i) the
Floating Allocation Percentage with respect to such Collection Period and
(ii) the percentage equivalent of a fraction, the numerator of which is the
Available Subordinated Amount as of the Determination Date occurring in such
Collection Period (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Distribution Date immediately
following such Determination Date), and the denominator of which is the
product of (x) the Pool Balance as of the last day of such immediately
preceding Collection Period and (y) the Series Allocation Percentage for the
Collection Period in respect of which the Excess Seller's Percentage is being
calculated or (b) 100% minus, when used with respect to Principal Collections
during the Class A-1 Accumulation Period, the Class A-2 Accumulation Period
and any Early Amortization Period, the sum of (i) the Principal Allocation
Percentage with respect to such Collection Period and (ii) the percentage
described in clause (a)(ii) above for such Collection Period.
"Seller's Participation Amount" for any date means an amount equal to
the Pool Balance on such date minus the aggregate invested amounts for all
outstanding Series on such date.
Deficiency Amount
On each Determination Date, the Servicer will determine for the Series
1999-2 Certificates the amount (the "Deficiency Amount"), if any, by which (a)
the sum of (i) Class A-1 Monthly Interest and Class A-2 Monthly Interest for
the following Distribution Date, (ii) Class A-1 Monthly Interest and Class A-2
Monthly Interest accrued but not paid with respect to prior Distribution Dates
(and interest thereon), (iii) the Monthly Servicing Fee for such Distribution
Date, (iv) the Investor Default Amount for such Distribution Date, (v) the
amount of any Adjustment Payment allocated to the Series 1999-2 Certificates
for such Distribution Date that has not been deposited in the Collection
Account as required under the Pooling and Servicing Agreement, and (vi) if
such Distribution Date is the Class A-1 Final Payment Date, any Class A-1
Carry-over Amount or, if such Distribution Date is the Class A-2 Final
Payment Date, any Class A-2 Carry-over Amount on such Distribution Date that
will not be satisfied on such date by the application of amounts on deposit in
the Yield Supplement Account as described under "Distributions from the
Collection Account; Reserve Fund; Yield Supplement Account -- Yield Supplement
Account" exceeds (b) the sum of (i) Certificateholder Interest Collections and
Investment Proceeds for such Distribution Date and (ii) the amount of funds in
the Reserve Fund on such Determination Date available to fund any portion of
the Deficiency Amount as described under "Distributions from the Collection
Account; Reserve Fund; Yield Supplement Account -- Interest Collections". The
lesser of the Deficiency Amount and the Available Subordinated Amount is the
"Draw Amount".
"Class A-1 Final Payment Date" means the first Distribution Date on
which, after giving effect to all payments to be made on such Distribution
Date, the outstanding principal balance of the Class A-1 Certificates will be
paid in full.
"Class A-2 Final Payment Date" means the first Distribution Date on
which, after giving effect to all payments to be made on such Distribution
Date, the outstanding principal balance on the Class A-2 Certificates will be
paid in full.
Available Subordinated Amount
The "Required Subordinated Amount" shall mean, as of any date of
determination, the sum of (i) the product of the initial Subordinated
Percentage, as adjusted from
S-25
time to time as described herein other than as a result of an increase
therein at the option of the Seller, and the Invested Amount and (ii) the
Incremental Subordinated Amount. Assuming that the Initial Invested Amount of
the Series 1999-2 Certificates is equal to the initial principal amount of
the Series 1999-2 Certificates, such amount would initially be $150,000,000.
The Available Subordinated Amount for a Determination Date is equal to
(a) the lesser of (i) the Available Subordinated Amount for the preceding
Determination Date, minus, with certain limitations, the Draw Amount for such
preceding Determination Date, minus funds from the Reserve Fund applied to
cover any portion of the Investor Default Amount, plus the excess, if any, of
the Required Subordinated Amount for such Determination Date over the
Required Subordinated Amount for the immediately preceding
Determination Date due to an increase in the Subordination Factor, plus the
amount of Excess Servicing available to be paid to the Seller as described
under "Distributions from the Collection Account; Reserve Fund; Yield
Supplement Account -- Excess Servicing", and (ii) the product of the
fractional equivalent of the Subordinated Percentage and the Invested Amount
minus (b) in the case of clause (a) (i) the Incremental Subordinated Amount
for such preceding Determination Date, plus (c) the Incremental Subordinated
Amount for the current Determination Date, plus (d) the Subordinated
Percentage of funds to be withdrawn from the Excess Funding Account on the
succeeding Distribution Date and paid to the Seller or allocated to one or
more Series; provided, however, (x) that, from and after the commencement of
the Class A-1 Accumulation Period until the Class A-1 Certificates are paid
in full, (y) from and after the commencement of the Class A-2 Accumulation
Period until the Class A-2 Certificates are paid in full and (z) from and
after the commencement of any Early Amortization Period that is not
terminated as described herein until the payment in full of the 1999-2
Certificates, the Available Subordinated Amount shall be calculated based on
the Invested Amount as of the close of business on the day preceding such
Class A-1 Accumulation Period, Class A-2 Accumulation Period or Early
Amortization Period, as applicable. The Available Subordinated Amount for the
first Determination Date is equal to the Required Subordinated Amount. The
"Incremental Subordinated Amount" on any Determination Date will equal the
result obtained by multiplying (a) a fraction, the numerator of which is the
sum of the Invested Amount on the last day of the immediately preceding
Collection Period and the Available Subordinated Amount for such
Determination Date (calculated without adding the Incremental Subordinated
Amount for such Determination Date as described in clause (c) above), and the
denominator of which is the Pool Balance on such last day by (b) the excess,
if any, of (x) the sum of the Overconcentration Amount, the Instalment
Balance Amount and the aggregate amount of Ineligible Receivables on such
Determination Date over (y) the aggregate amount of Ineligible Receivables,
Receivables in Accounts containing Dealer Overconcentrations and Receivables
in Instalment Balances, in each case that became Defaulted Receivables during
the preceding Collection Period and are not subject to reassignment from the
Trust, unless certain insolvency events relating to the Seller or CFC have
occurred, as further described in the Pooling and Servicing Agreement.
The "Subordinated Percentage" will initially equal the percentage
equivalent of a fraction, the numerator of which is the Subordination Factor
and the denominator of which will be the excess of 100% over the
Subordination Factor. The Subordination Factor will initially be 10%, but
will be subject to increase to 11% in the event that the rating of CFC's
long-term unsecured debt is lowered below BBB- by Standard & Poor's or
withdrawn by Standard & Poor's, unless the Seller receives written
confirmation from Standard & Poor's that the failure to so increase the
Subordination Factor would not result in such Rating Agency lowering or
withdrawing its rating of the Series 1999-2 Certificates. The Seller may, in
its sole discretion, at any time increase the Available Subordinated Amount
for so long as the cumulative amount of such increases does not exceed the
lesser of (i) $15,000,000 or (ii) 1.11% of the Invested Amount. The Seller is
not under any obligation to increase the Available Subordinated Amount at any
time, except as described herein. If the Available Subordinated Amount were
reduced to less than the Required Subordinated Amount, an Early Amortization
Event would occur. The Seller could elect to increase the Available
Subordinated Amount at the time such Early Amortization Event would otherwise
occur, thus preventing or delaying the occurrence of the Early Amortization
Event.
S-26
Distributions from the Collection Account; Reserve Fund; Yield Supplement
Account
Interest Collections. On each Distribution Date, commencing with the
initial Distribution Date, the Servicer shall instruct the Trustee to apply
Certificateholder Interest Collections and Investment Proceeds, if any, in
respect of the related Collection Period to make the following distributions
in the following priority:
(i) first, an amount equal to Class A-1 Monthly Interest for such
Distribution Date, plus the amount of any Class A-1 Monthly Interest
previously due but not distributed on a prior Distribution Date (plus,
but only to the extent permitted under applicable law, interest at the
Class A-1 Certificate Rate on Class A-1 Monthly Interest previously due
but not distributed), shall be distributed to the Class A-1
Certificateholders, and an amount equal to Class A-2 Monthly Interest
for such Distribution Date, plus the amount of any Class A-2 Monthly
Interest previously due but not distributed on a prior Distribution
Date (plus, but only to the extent permitted under applicable law,
interest at the Class A-2 Certificate Rate on Class A-2 Monthly
Interest previously due but not distributed), shall be distributed to
the Class A-2 Certificateholders;
(ii) second, an amount equal to the Monthly Servicing Fee for
such Distribution Date shall be distributed to the Servicer (unless
such amount has been netted against deposits to the Collection Account
as described in the Prospectus under "Description of the Certificates
-- Allocation of Collections; Deposits in Collection Account" or waived
by the Servicer);
(iii) third, an amount equal to the Reserve Fund Deposit Amount,
if any, for such Distribution Date shall be deposited in the Reserve
Fund;
(iv) fourth, an amount equal to the Investor Default Amount, if
any, for such Distribution Date shall be treated as a portion of
Available Certificateholder Principal Collections for such Distribution
Date;
(v) fifth, an amount equal to any outstanding Class A-1
Carry-over Amount (after giving effect to any withdrawals from the
Yield Supplement Account) shall be distributed to the Class A-1
Certificateholders and an amount equal to any outstanding Class A-2
Carry-over Amount (after giving effect to any withdrawals from the
Yield Supplement Account) shall be distributed to the Class A-2
Certificateholders;
(vi) sixth, an amount equal to the Yield Supplement Account
Deposit Amount, if any, for such Distribution Date shall be deposited
in the Yield Supplement Account; and
(vii) seventh, the balance shall constitute Excess Servicing.
In the event Certificateholder Interest Collections and Investment
Proceeds are insufficient to make the entire amount of any distribution
described in clause (i) or (v) above, funds available for such distribution
will be applied to make such distribution to the Class A-1 Certificateholders
and the Class A-2 Certificateholders pro rata based on the Class A-1
Allocation Percentage and the Class A-2 Allocation Percentage, respectively,
for the related Collection Period. Any excess in the amount allocated to make
distributions to the holders of either Class of Series 1999-2 Certificates
pursuant to any such clause over the amount required to make such
distribution will be applied to cover any shortfalls in the amount available
to make distributions to holders of Certificates of the other Class pursuant
to such clause.
If such Certificateholder Interest Collections and Investment Proceeds
are not sufficient to make the entire distributions required by clauses (i),
(ii) and (iv) and, in the case of the Class A-1 Final Payment Date only,
clause (v) with respect to the Class A-1 Certificates and, in the case of the
Class A-2 Final Payment Date only, clause (v) with respect to the Class A-2
Certificates, the Trustee shall withdraw funds from the Reserve Fund (in the
case of clause (v) only to the extent such amounts would otherwise be
distributed to the Seller) and apply such funds to complete the distributions
pursuant to such clauses; provided, however, that during any Early
Amortization Period funds shall not be withdrawn from the
S-27
Reserve Fund to make distributions required by clause (iv) to the extent
that, after giving effect to such withdrawal, the amount on deposit in the
Reserve Fund shall be less than $1,000,000.
If there is a Draw Amount for such Distribution Date and such
Distribution Date is not the Class A-1 Final Payment Date or the Class A-2
Final Payment Date, the Trustee shall apply the amount of Available Seller's
Collections for the related Collection Period on deposit in the Collection
Account on such Distribution Date, but only up to the Draw Amount, to make
the distributions required by clauses (i), (ii) and (iv) above that have not
been made through the application of funds from the Reserve Fund as described
in the preceding paragraph. If there is a Draw Amount for such Distribution
Date and such Distribution Date is the Class A-1 Final Payment Date or the
Class A-2 Final Payment Date, the Trustee shall apply the amount of Available
Seller's Collections for the related Collection Period on deposit in the
Collection Account on such Distribution Date, but only up to the Draw Amount,
to make the distributions required by (x) clauses (i), (ii) and (iv) above
with respect to the Series 1999-2 Certificates and (y) clause (v) above with
respect to the Class A-1 Certificates, in the case of the Class A-1 Final
Payment Date, or with respect to the Class A-2 Certificates, in the case of
the Class A-2 Final Payment Date, that have not been made through the
application of funds from the Reserve Fund as described in the preceding
paragraph. Additionally, Available Seller's Collections will be applied to
any unpaid Adjustment Payments. The Available Subordinated Amount will be
reduced by the amount of Available Seller's Collections so applied. If the
Draw Amount exceeds such Available Seller's Collections, the Available
Subordinated Amount will be reduced by the amount of such excess, but not by
more than the sum of the Investor Default Amount and the portion of
Adjustment Payments not paid by the Seller, in order to maintain the Invested
Amount, but not generally by more than the Investor Default Amount for
such Distribution Date.
"Certificateholder Interest Collections" for any Distribution Date
means the portion of Series Allocable Interest Collections for the related
Collection Period allocated to the Series 1999-2 Certificateholders' Interest
as described under "Allocation Percentages -- Allocation Between the Series
1999-2 Certificateholders and the Seller".
"Investment Proceeds" for any Distribution Date means an amount equal
to the sum of investment earnings for the preceding Collection Period from:
(a) funds held in the Reserve Fund;
(b) the Series Allocation Percentage of funds held in the Collection
Account;
(c) funds held in the Excess Funding Account;
(d) funds held in the Yield Supplement Account; and
(e) funds held in the Principal Funding Account.
"Class A-1 Allocation Percentage" for any Collection Period means the
percentage equivalent (which shall never exceed 100%) of a fraction, the
numerator of which is the outstanding principal amount of the Class A-1
Certificates as of the last day of the immediately preceding Collection
Period (after giving effect to any reduction thereof to occur on the
immediately following Distribution Date) and the denominator of which is the
aggregate outstanding principal amount of all the Series 1999-2 Certificates
as of such last day (after giving effect to any reduction thereof to occur on
the immediately following Distribution Date).
"Class A-2 Allocation Percentage" for any Collection Period means the
percentage obtained by subtracting from 100% the Class A-1 Allocation
Percentage for such Collection Period.
Reserve Fund. The "Reserve Fund" will be an Eligible Deposit Account
established and maintained in the name of the Trustee for the benefit of the
Series 1999-2 Certificateholders. On the Series Issuance Date, the Seller
will deposit $4,725,000 (0.35% of the principal balance of the Series 1999-2
Certificates) into the Reserve Fund. The "Reserve Fund Required Amount" for
any Distribution Date will equal 0.35% of the outstanding principal balance
of the Series 1999-2 Certificates for such Distribution Date
S-28
(after giving effect to any change therein on such Distribution Date). The
"Reserve Fund Deposit Amount" is the amount, if any, by which the Reserve
Fund Required Amount exceeds the amount on deposit in the Reserve Fund. Funds
in the Reserve Fund will be invested in Eligible Investments that will mature
on or prior to the next Distribution Date. On each Determination Date, the
Servicer will apply any investment earnings (net of losses and investment
expenses) with respect to the Reserve Fund as set forth under "Distributions
from the Collection Account; Reserve Fund"; Yield Supplement Account. After
the earlier of the payment in full of the outstanding principal balance of
the Series 1999-2 Certificates and the Class A-2 Termination Date, any funds
remaining on deposit in the Reserve Fund will be paid to the Seller.
If, after giving effect to the allocations, distributions and deposits
in the Reserve Fund described above under "Interest Collections", the amount
in the Reserve Fund is less than the Reserve Fund Required Amount for the
next following Distribution Date, the Trustee shall deposit any remaining
Available Seller's Collections for the related Collection Period into the
Reserve Fund until the amount in the Reserve Fund is equal to such Reserve
Fund Required Amount.
If, for any Distribution Date with respect to an Early Amortization
Period, after giving effect to the allocations, distributions and deposits
described in the preceding paragraph, the amount in the Reserve Fund is less
than the Excess Reserve Fund Required Amount for such Distribution Date, the
Trustee shall deposit the remaining Available Seller's Collections for the
related Collection Period into the Reserve Fund until the amount in the
Reserve Fund is equal to such Excess Reserve Fund Required Amount. The
"Excess Reserve Fund Required Amount" for any such Distribution Date means an
amount equal to the greater of (a) 5% of the initial principal balance of the
Series 1999-2 Certificates and (b) the excess of (i) the sum of (x) the
Available Subordinated Amount on the preceding Determination Date (after
giving effect to the allocations, distributions, withdrawals and deposits to
be made on such Distribution Date) and (y) an amount equal to (A) the excess
of the Required Participation Percentage over 100%, multiplied by (B) the
outstanding principal balance of the Series 1999-2 Certificates on such
Distribution Date (after giving effect to any changes therein on such
Distribution Date) over (ii) the excess of (x) the Series Allocation
Percentage of the Pool Balance on the last day of the immediately
preceding Collection Period over (y) the Invested Amount on such Distribution
Date (after giving effect to changes therein on such Distribution Date);
provided that the Excess Reserve Fund Required Amount shall not exceed such
Available Subordinated Amount.
Yield Supplement Account. The Yield Supplement Account will be an
Eligible Deposit Account established and maintained in the name of the
Trustee for the benefit of the Series 1999-2 Certificateholders. On the
Series Issuance Date, the Seller will deposit $5,400,000 (0.40% of the
principal balance of the Series 1999-2 Certificates) into the Yield
Supplement Account. The "Yield Supplement Account Required Amount" for any
Distribution Date will equal 0.40% of the outstanding principal balance of
the Series 1999-2 Certificates for such Distribution Date (after giving
effect to any change therein on such Distribution Date). On any Distribution
Date on which there is a Class A-1 Carry-over Amount or a Class A-2
Carry-over Amount, the amount on deposit in the Yield Supplement Account on
such Distribution Date shall be applied by the Trustee up to the amount of
such Carry-over Amount to satisfy such Carry-over Amount. In the event of any
insufficiency of funds on deposit in the Yield Supplement Account to satisfy
all such Carry-over Amounts, such funds shall be applied to the Class A-1
Carry-over Amount and the Class A-2 Carry-over Amount pro rata based on the
Class A-1 Allocation Percentage and the Class A-2 Allocation Percentage,
respectively, for the related Collection Period. Any excess in the amount so
allocated to pay a Class A-1 Carry-over Amount or a Class A-2 Carry-over
Amount over the amount of such Carry-over Amount will be applied to cover any
shortfall in the amount available to pay a Carry-over Amount with respect to
the other Class of Series 1999-2 Certificates. The "Yield Supplement Account
Deposit Amount" is the amount, if any, by which the Yield Supplement Account
Required Amount exceeds the amount on deposit in the Yield Supplement
Account. Funds in the Yield Supplement Account will be invested at the
direction of the Servicer in any investments consisting of financial assets
that by their terms convert to cash within a finite period of time. On each
Determination Date, the Servicer will apply any investment earnings (net of
losses and investment expenses) with respect to the Yield Supplement Account
as set forth under "Distributions from the Collection Account; Reserve Fund;
Yield Supplement Account -- Interest Collections". After
S-29
the earlier of the payment in full of the outstanding principal balance of
the Series 1999-2 Certificates and the Class A-2 Termination Date, any funds
remaining on deposit in the Yield Supplement Account will be paid to the
Seller.
Excess Servicing. On each Distribution Date, the Servicer will allocate
Excess Servicing with respect to the Collection Period immediately preceding
such Distribution Date, in the following priority:
(a) first, an amount equal to the aggregate amount of Investor
Charge-Offs which have not been previously reimbursed (after giving
effect to the allocation on such Distribution Date of Series Allocable
Miscellaneous Payments with respect to such Distribution Date) will be
allocated in the same manner as Available Certificateholder Principal
Collections for such Distribution Date;
(b) second, an amount equal to the aggregate outstanding amounts
of the Monthly Servicing Fee which have been previously waived as
described under "Servicing Compensation and Payment of Expenses" in the
Prospectus will be distributed to the Servicer; and
(c) third, the balance, if any, shall increase the Available
Subordinated Amount as described in the definition thereof and be
distributed to the Seller,
Principal Collections
On each Distribution Date, the Servicer will allocate Available
Certificateholder Principal Collections as follows:
(a) for each Distribution Date with respect to any Nonprincipal
Period, all Available Certificateholder Principal Collections will be
allocated first, to make a deposit to the Excess Funding Account if the
sum of (i) the Series 1999-2 Certificateholders' Interest in Principal
Receivables (determined for this purpose by reducing such interest by
the amount, if any, by which the Required Participation Amount exceeds
the Pool Balance due to an increase in the Subordination Factor) and
(ii) the amount on deposit in the Excess Funding Account prior to the
allocation on such Distribution Date is less than the outstanding
principal balance of the Series 1999-2 Certificates and second to
Excess Principal Collections as described under "Allocation Percentages
-- Principal Collections for all Series"; and
(b) for each Distribution Date with respect to the Class A-1
Accumulation Period, all Available Certificateholder Principal
Collections will be allocated as follows:
(i) all Class A-1 Available Certificateholder Principal
Collections will be allocated as follows:
(x) first, an amount equal to Class A-1 Monthly
Principal for such Distribution Date will be deposited to
the Principal Funding Account; and
(y) second, the balance, if any, will be allocated to
Excess Principal Collections; and
(ii) all Class A-2 Available Certificateholder Principal
Collections will be allocated as follows first, to make a deposit
to the Excess Funding Account if the sum of (x) the Class A-2
Certificateholders' Interest in Principal Receivables (determined
for this purpose by reducing such interest by the amount, if any,
by which the Required Participation Amount exceeds the Pool
Balance due to an increase in the Subordination Factor) and (y)
the amount on deposit in the Excess Funding Account prior to the
allocation on such Distribution Date is less than the outstanding
principal balance of the Class A-2 Certificates and second to
Excess Principal Collections;
(c) for each Distribution Date with respect to the Class A-2
Accumulation Period, all Class A-2 Available Certificateholder
Principal Collections will be allocated as follows:
(i) first, an amount equal to Class A-2 Monthly Principal
for such Distribution Date will be deposited to the Principal
Funding Account; and
(ii) second, the balance, if any, will be allocated to
Excess Principal Collections; and
S-30
(d) for each Distribution Date with respect to any Early
Amortization Period, an amount equal to the sum of Class A-1 Monthly
Principal and Class A-2 Monthly Principal will be distributed to the
Class A-1 Certificateholders and the Class A-2 Certificateholders,
respectively.
In the event Available Certificateholder Principal Collections are
insufficient to make the entire amount of any distribution described in
clause (d) above, funds available for such distribution will be applied to
make such distribution to the Class A-1 Certificateholders and the Class A-2
Certificateholders pro rata based on the Class A-1 Allocation Percentage and
the Class A-2 Allocation Percentage, respectively, for the related Collection
Period. Any excess in the amount allocated to make distributions to the
holders of either Class of Series 1999-2 Certificates pursuant to such clause
over the amount required to make such distribution will be applied to cover
any shortfalls in the amount available to make distributions to holders of
Certificates of the other Class pursuant to such clause.
In the event that the Class A-2 Invested Amount is greater than zero on
the Class A-2 Termination Date, any funds remaining in the Reserve Fund
(after the application of funds in the Reserve Fund as described above under
"Interest Collections") will be treated as a portion of Available
Certificateholder Principal Collections for the Distribution Date occurring
on the Class A-2 Termination Date.
"Class A-1 Available Certificateholder Principal Collections" for any
Distribution Date means the amount of Available Certificateholder Principal
Collections allocated to the Class A-1 Certificates with respect to such
Distribution Date as described under "Allocation Percentages -- Allocation
Between the Class A-1 Certificateholders and the Class A-2
Certificateholders".
"Class A-1 Monthly Principal" with respect to any Distribution Date
relating to the Class A-1 Accumulation Period or any Early Amortization
Period will equal Class A-1 Available Certificateholder Principal Collections
for such Distribution Date; provided, however, that for each Distribution
Date with respect to the Class A-1 Accumulation Period, Class A-1 Monthly
Principal may not exceed the Class A-1 Controlled Deposit Amount; and
provided, further, that Class A-1 Monthly Principal shall not exceed the
Invested Amount of the Class A-1 Certificates.
"Class A-1 Controlled Deposit Amount" for a Distribution Date means the
excess, if any, of (a) the sum of (i) the product of the Class A-1 Controlled
Accumulation Amount and the number of Distribution Dates from and including
the first Distribution Date with respect to the Class A-1 Accumulation Period
through and including such Distribution Date (but not in excess of the Class
A-1 Accumulation Period Length) and (ii) the amount on deposit in the Excess
Funding Account with respect to the Class A-1 Certificates as of the November
2001 Distribution Date (after giving effect to any withdrawals from or
deposits to such account on such date (other than the transfer to the
Principal Funding Account of certain amounts on deposit therein on such
date)) over (b) the sum of amounts on deposit in the Excess Funding Account
with respect to the Class A-1 Certificates and the Principal Funding Account,
in each case before giving effect to any withdrawals from or deposits to such
accounts on such Distribution Date.
"Class A-1 Controlled Accumulation Amount" means an amount equal to the
Class A-1 Invested Amount as of the November 2001 Distribution Date (after
giving effect to any changes therein on such date) divided by the Class A-1
Accumulation Period Length.
"Class A-2 Available Certificateholder Principal Collections" for any
distribution date means the amount of Available Certificateholder Principal
Collections allocated to the Class A-2 Certificates as described under
"Allocation Percentages -- Allocations between the Class A-1
Certificateholders and the Class A-2 Certificateholders".
"Class A-2 Monthly Principal" with respect to any Distribution Date
relating to the Class A-2 Accumulation Period or any Early Amortization
Period will equal Class A-2 Available Certificateholder Principal Collections
for such Distribution Date; provided, however, that for each Distribution
Date with respect to the Class A-2 Accumulation Period, Class A-2 Monthly
Principal may not exceed the Class A-2 Controlled Deposit Amount; and
provided, further, that Class A-2 Monthly Principal shall not exceed the
Invested Amount of the Class A-2 Certificates.
S-31
"Class A-2 Controlled Deposit Amount" for a Distribution Date means the
excess, if any, of (a) the sum of (i) the product of the Class A-2 Controlled
Accumulation Amount and the number of Distribution Dates from and including
the first Distribution Date with respect to the Class A-2 Accumulation Period
through and including such Distribution Date (but not in excess of the Class
A-2 Accumulation Period Length) and (ii) the amount on deposit in the Excess
Funding Account as of the November 2003 Distribution Date (after giving
effect to any withdrawals from or deposits to such account on such date
(other than the transfer to the Principal Funding Account of the amounts on
deposit therein on such date)) over (b) the sum of amounts on deposit in the
Excess Funding Account and the Principal Funding Account, in each case before
giving effect to any withdrawals from or deposits to such accounts on such
Distribution Date.
"Class A-2 Controlled Accumulation Amount" means an amount equal to the
Class A-2 Invested Amount as of the November 2003 Distribution Date (after
giving effect to any changes therein on such date) divided by the Class A-2
Accumulation Period Length.
Required Participation Percentage
"Required Participation Percentage" shall mean, with respect to Series
1999-2, 103%; provided, however, that if the aggregate amount of Principal
Receivables due from any Dealer or group of affiliated Dealers at the close
of business on the last day of any Collection Period with respect to which
such determination is being made is greater than 1.5% of the Pool Balance on
such last day, the Required Participation Percentage shall mean, as of such
last day and with respect to such Collection Period and the immediately
following Collection Period only, 104%; provided, further, that the Seller
may, upon ten days' prior notice to the Trustee, the Rating Agencies and any
Enhancement Provider reduce the Required Participation Percentage to not less
than 100%, so long as the Rating Agencies shall not have notified the Seller
or the Servicer that any such reduction will result in a reduction or
withdrawal of the rating of the Series 1999-2 Certificates or any other
outstanding Series or Class of Certificates.
Principal Funding Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the
Series 1999-2 Certificateholders (the "Principal Funding Account"). On each
Distribution Date with respect to the Class A-1 Accumulation Period, Class
A-1 Monthly Principal will be deposited in the Principal Funding Account and
on each Distribution Date with respect to the Class A-2 Accumulation Period,
Class A-2 Monthly Principal will be deposited in the Principal Funding
Account, in each case as provided above under "Distributions from the
Collection Account; Reserve Fund -- Principal Collections"; provided, that,
if an Early Amortization Period that is not terminated as described herein
commences during the Class A-1 Accumulation Period or the Class A-2
Accumulation Period, the Principal Funding Account Balance shall be paid to
the Series 1999-2 Certificateholders on the first Special Payment Date.
All amounts on deposit in the Principal Funding Account on any
Distribution Date (after giving effect to distributions to be made on such
Distribution Date) (the "Principal Funding Account Balance") will be invested
from the date of their deposit to on or prior to the Class A-1 Expected
Payment Date or, after the Class A-1 Certificates have been paid in full, the
Class A-2 Expected Payment Date by the Trustee at the direction of the
Servicer in Eligible Investments that will mature on or prior to the
following Distribution Date. The Servicer may select an appropriate agent as
representative of the Servicer for the purpose of designating such
investments. On each Distribution Date, the interest and other investment
income on the Principal Funding Account Balance will be applied as provided
above under "Distributions from the Collection Account; Reserve Fund; Yield
Supplement Account".
Distributions
Payments to Series 1999-2 Certificateholders will be made from the
Collection Account, the Reserve Fund, the Principal Funding Account, the Yield
Supplement Account and the Excess Funding Account.
S-32
(a) The Servicer shall instruct the Trustee to apply funds on
deposit in the Collection Account and the Reserve Fund and shall
instruct the Trustee to make the following distributions at the
following times:
(i) on each Distribution Date all amounts on deposit in the
Collection Account and the Reserve Fund as are payable to the
Series 1999-2 Certificateholders with respect to accrued interest
will be distributed to the Series 1999-2 Certificateholders.
(b) The Servicer shall instruct the Trustee to apply the funds on
deposit in the Principal Funding Account, the Collection Account and
the Excess Funding Account and shall instruct the Trustee to make,
without duplication, the following distributions at the following
times:
(i) on the Class A-1 Expected Payment Date, the Principal
Funding Account Balance, the amount on deposit in the Excess
Funding Account with respect to the Class A-1 Certificates and
all amounts on deposit in the Collection Account as are payable
to Class A-1 Certificateholders with respect to principal shall
be distributed to the Class A-1 Certificateholders up to a
maximum amount on any such date equal to the excess of the
outstanding principal amount of the Class A-1 Certificates over
unreimbursed Class A-1 Investor Charge-Offs, each on such date.
(ii) on the Class A-2 Expected Payment Date, the Principal
Funding Account Balance, the amount on deposit in the Excess
Funding Account and all amounts on deposit in the Collection
Account as are payable to Class A-2 Certificateholders with
respect to principal shall be distributed to the Class A-2
Certificateholders up to a maximum amount on any such date equal
to the excess of the outstanding principal amount of the Class
A-2 Certificates over unreimbursed Class A-2 Investor
Charge-Offs, each on such date.
(iii) on each Special Payment Date, the Principal Funding
Account Balance, the amount on deposit in the Excess Funding
Account and all amounts on deposit in the Collection Account as
are payable to Series 1999-2 Certificateholders with respect to
principal shall be distributed to the Series 1999-2
Certificateholders up to a maximum amount on such date equal to
the excess of the outstanding principal amount of the Series
1999-2 Certificates over unreimbursed Investor Charge-Offs, each
on such date.
(c) On each Distribution Date on which there is an unpaid Class
A-1 Carry-over Amount, the Servicer shall instruct the Trustee to
distribute to the Class A-1 Certificateholders such Class A-1
Carry-over Amount to the extent funds are available therefor first from
amounts on deposit in the Yield Supplement Account and second to the
extent funds are available therefor after making all required
distributions and deposits with respect to the Series 1999-2
Certificates as provided above under "Distributions from the Collection
Account; Reserve Fund; Yield Supplement Account -- Interest
Collections".
(d) On each Distribution Date on which there is an unpaid Class
A-2 Carry-over Amount, the Servicer shall instruct the Trustee to
distribute to the Class A-2 Certificateholders such Class A-2
Carry-over Amount to the extent funds are available therefor first from
amounts on deposit in the Yield Supplement Account and second to the
extent funds are available therefor after making all required
distributions and deposits with respect to the Series 1999-2
Certificates as provided above under "Distributions from the Collection
Account; Reserve Fund; Yield Supplement Account -- Interest
Collections".
(e) If, on the Class A-1 Final Payment Date or the Class A-2
Final Payment Date, there is any Class A-1 or Class A-2 Carry-over
Amount (after giving effect to any distributions on such date pursuant
to (a) through (d) above), the Trustee shall distribute to the Class
A-1 Certificateholders and the Class A-2 Certificateholders (i) certain
amounts on deposit in the Reserve Fund (to the extent such amounts
would otherwise be distributed to the Seller) and (ii) Available
Seller's Collections on deposit in the Collection Account (to the
extent such amounts would otherwise be distributed to the Seller) which
are available to satisfy such Class A-1 Carry-over Amount or
S-33
Class A-2 Carry-over Amount on the Class A-1 Final Payment Date or
Class A-2 Final Payment Date, as applicable, as described above under
"Distributions from the Collection Account; Reserve Fund; Yield
Supplement Account -- Interest Collections".
All distributions shall be made to the Series 1999-2 Certificateholders
of record at the close of business on the day immediately preceding the
related Distribution Date (each such day a "Record Date"), except that the
final distribution with respect to any Series 1999-2 Certificate will be made
only upon surrender of such Series 1999-2 Certificate.
Optional Repurchase
The Class A-1 Certificateholders' Interest will be subject to optional
repurchase by CFC on any Distribution Date after the Class A-1 Invested
Amount is reduced to an amount less than or equal to $75,000,000 (10% of the
initial outstanding principal amount of the Class A-1 Certificates); and the
Class A-2 Certificateholders' Interest will be subject to optional repurchase
by CFC on any Distribution Date after the Class A-2 Invested Amount is
reduced to an amount less than or equal to $60,000,000 (10% of the initial
outstanding principal amount of the Class A-2 Certificates). The purchase
price will equal the sum of (i) the Invested Amount of the Class of
Certificates to be repurchased on the Determination Date preceding the
Distribution Date on which the purchase is scheduled to be made, (ii) accrued
and unpaid interest on that Class of Series 1999-2 Certificates at the
applicable Certificate Rate (together with interest on overdue interest) and
(iii) any outstanding Carry-Over Amount with respect to that Class of Series
1999-2 Certificates.
Investor Charge-Offs
If the Available Subordinated Amount is reduced to zero and on any
Distribution Date the Deficiency Amount is greater than zero, the outstanding
principal balance of the Series 1999-2 Certificates will be reduced by the
Deficiency Amount, but not by more than the Investor Default Amount for such
Distribution Date (an "Investor Charge-Off"). Any such reduction shall be
applied to reduce the outstanding principal balance the Class A-1
Certificates (a "Class A-1 Investor Charge-Off") and the Class A-2
Certificates (a "Class A-2 Investor Charge-Off") pro rata based on the Class
A-1 Allocation Percentage and the Class A-2 Allocation Percentage,
respectively, in each case for the related Collection Period. Any reduction
in the outstanding principal balance of the Series 1999-2 Certificates of
either Class will have the effect of slowing or reducing the return of
principal to the holders of Series 1999-2 Certificates of that Class. If the
outstanding principal balance of the Series 1999-2 Certificates has been
reduced by any Investor Charge-Offs, it will thereafter be increased on any
Distribution Date (but not by an amount in excess of the aggregate
unreimbursed Investor Charge-Offs) by the sum of (a) Series Allocable
Miscellaneous Payments for such Distribution Date and (b) the amount of
Excess Servicing allocated and available for such purpose as described above.
Any such increase shall be applied pro rata between the Class A-1
Certificates and the Class A-2 Certificates as described above.
Early Amortization Events
The Early Amortization Events with respect to the Series 1999-2
Certificates will include each of the events so defined in the Prospectus,
plus the following:
1. failure on the part of USA, the Servicer or CFC, as
applicable, (i) to make any payment or deposit required by the Pooling
and Servicing Agreement or the Receivables Purchase Agreement,
including but not limited to any Transfer Deposit Amount or Adjustment
Payment, on or before the date occurring two business days after the
date such payment or deposit is required to be made therein; or (ii) to
deliver a Distribution Date Statement on the date required under the
Pooling and Servicing Agreement (or within the applicable grace period
which will not exceed five business days); (iii) to comply with its
covenant not to create any lien on a Receivable; or (iv) to observe or
perform in any material respect any other covenants or agreements set
forth in the Pooling and Servicing Agreement or the Receivables
Purchase Agreement, which failure continues unremedied for a period of
45 days after written notice of such failure;
S-34
2. any representation or warranty made by the RPA Seller in the
Receivables Purchase Agreement or by USA in the Pooling and Servicing
Agreement or any information required to be given by USA to the Trustee
to identify the Accounts proves to have been incorrect in any material
respect when made and continues to be incorrect in any material respect
for a period of 60 days after written notice and as a result the
interests of the Certificateholders are materially and adversely
affected; provided, however, that an Early Amortization Event shall not
be deemed to occur thereunder if USA has repurchased the related
Receivables or all such Receivables, if applicable, during such period
in accordance with the provisions of the Pooling and Servicing
Agreement;
3. the occurrence of certain events of bankruptcy, insolvency or
receivership relating to CFC or DaimlerChrysler;
4. a failure by USA to convey Receivables in Additional Accounts
to the Trust within five business days after the day on which it is
required to convey such Receivables pursuant to the Pooling and
Servicing Agreement;
5. on any Determination Date, the Available Subordinated Amount
for the next Distribution Date will be reduced to an amount less than
the Required Subordinated Amount on such Determination Date after
giving effect to the distributions to be made on the next Distribution
Date;
6. any Service Default with respect to the Series 1999-2
Certificates occurs;
7. on any Determination Date, as of the last day of the preceding
Collection Period, the aggregate amount of Principal Receivables
relating to Used Vehicles exceeds 20% of the Pool Balance on such last
day;
8. on any Determination Date, the average of the Monthly Payment
Rates for the two preceding Collection Periods, is less than 20%; and
9. any Carry-over Amount is outstanding on six consecutive
Distribution Dates.
In the case of any event described in clause 1, 2 or 6 above, an Early
Amortization Event with respect to Series 1999-2 will be deemed to have
occurred only if, after the applicable grace period described in such
clauses, if any, either the Trustee or Series 1999-2 Certificateholders
holding Series 1999-2 Certificates evidencing more than 50% of the aggregate
unpaid principal amount of the Series 1999-2 Certificates by written notice
to the Seller and the Servicer (and the Trustee, if given by
Certificateholders) declare that an Early Amortization Event has occurred as
of the date of such notice. In the case of any Early Amortization Event
described in the Prospectus or any event described in clause 3, 4, 5, 7, 8
and 9 above, an Early Amortization Event with respect to Series 1999-2 will
be deemed to have occurred without any notice or other action on the part of
the Trustee or the Series 1999-2 Certificateholders immediately upon the
occurrence of such event.
Under certain limited circumstances, an Early Amortization Period which
commences prior to the scheduled end of the Revolving Period may terminate
and the Class A-1 Revolving Period or the Class A-2 Revolving Period
recommence. If an Early Amortization Period results from the failure by USA
to convey Receivables in Additional Accounts to the Trust, as described in
paragraph 4 above, during the Class A-1 Revolving Period or the Class A-2
Revolving Period and no other Early Amortization Event that has not been
cured or waived as described herein has occurred, the Early Amortization
Period resulting from such failure will terminate and the Class A-1 Revolving
Period or the Class A-2 Revolving Period will recommence (unless the
scheduled termination date of the Class A-1 Revolving Period or the Class A-2
Revolving Period, as applicable, has occurred) as of the end of the first
Collection Period during which the Seller would no longer be required to
convey Receivables to the Trust. The Seller may no longer be required to
convey Receivables as described above as a result of a reduction in the
Invested Amount occurring due to principal payments made in respect of the
Series 1999-2 Certificates and the Certificates of other outstanding Series
during the Early Amortization Period or as a result of the
S-35
subsequent addition of Receivables to the Trust. Notwithstanding the
foregoing, if any Early Amortization Event (other than an Early Amortization
Event described in clause 3 above or in the Prospectus) occurs, the Class A-1
Revolving Period or the Class A-2 Revolving Period will recommence following
receipt of (i) written confirmation by each Rating Agency (other than
Moody's) that its rating of the Series 1999-2 Certificates will not be
withdrawn or lowered as a result of such recommencement and (ii) the consent
of Series 1999-2 Certificateholders holding Series 1999-2 Certificates
evidencing more than 50% of the aggregate unpaid principal amount of the
Series 1999-2 Certificates to such recommencement, provided that no other
Early Amortization Event that has not been cured or waived as described
herein has occurred and the scheduled termination of the Class A-1 Revolving
Period or the Class A-2 Revolving Period, as applicable, has not occurred.
Termination
The last payment of principal and interest on the Class A-1
Certificates will be due and payable no later than the May 2004 Distribution
Date (the "Class A-1 Termination Date"). In the event that the aggregate
Class A-1 Invested Amount is greater than zero on the Class A-1 Termination
Date (after giving effect to deposits and distributions otherwise to be made
on such Class A-1 Termination Date), the Trustee will sell or cause to be
sold (and apply the proceeds to the extent necessary to pay such remaining
amounts to all Class A-1 Certificateholders) an interest in the Receivables
or certain Receivables, as specified in the Pooling and Servicing Agreement,
in an amount equal to (a) 110% of the aggregate Class A-1 Invested Amount on
such Class A-1 Termination Date (after giving effect to such deposits and
distributions) and (b) the product of the Available Subordinated Amount on
the preceding Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Distribution Date
following such Determination Date) and the Class A-1 Allocation Percentage;
provided, however, that in no event shall such amount exceed the product of
the Series Allocation Percentage (for the Collection Period in which such
Class A-1 Termination Date occurs) of Receivables on such Class A-1
Termination Date and the Class A-1 Allocation Percentage. The net proceeds of
such sale and any collections on the Receivables will be paid pro rata to
Class A-1 Certificateholders on the Class A-1 Termination Date as the final
payment of the Series Class A-1 Certificates.
The last payment of principal and interest on the Class A-2
Certificates will be due and payable no later than the May 2006 Distribution
Date (the "Class A-2 Termination Date"). In the event that the aggregate
Class A-2 Invested Amount is greater than zero on the Class A-2 Termination
Date (after giving effect to deposits and distributions otherwise to be made
on such Class A-2 Termination Date), the Trustee will sell or cause to be
sold (and apply the proceeds to the extent necessary to pay such remaining
amounts to all Class A-2 Certificateholders) an interest in the Receivables
or certain Receivables, as specified in the Pooling and Servicing Agreement,
in an amount equal to (a) 110% of the aggregate Class A-2 Invested Amount on
such Class A-2 Termination Date (after giving effect to such deposits and
distributions) and (b) the Available Subordinated Amount on the preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Distribution Date following such
Determination Date); provided, however, that in no event shall such amount
exceed the Series Allocation Percentage (for the Collection Period in which
such Class A-2 Termination Date occurs) of Receivables on such Class A-2
Termination Date. The net proceeds of such sale and any collections on the
Receivables will be paid pro rata to Class A-2 Certificateholders on the
Class A-2 Termination Date as the final payment of the Class A-2
Certificates.
Reports
On each Distribution Date (including each Distribution Date that
corresponds to the Class A-1 Expected Payment Date, the Class A-2 Expected
Payment Date or any Special Payment Date), commencing with the initial
Distribution Date, the Trustee will forward to each Series 1999-2
Certificateholder of record a statement (the "Distribution Date Statement")
prepared by the Servicer setting forth the following information (which, in
the case of (c), (d) and (e) below, will be stated on the basis of an
original principal amount of $1,000 per Series 1999-2 Certificate if the
Class A-1 Accumulation
S-36
Period, the Class A-2 Accumulation Period or an Early Amortization Period has
commenced): (a) the aggregate amount of collections, the aggregate amount of
Interest Collections and the aggregate amount of Principal Collections
processed during the immediately preceding Collection Period; (b) the Series
Allocation Percentage, the Floating Allocation Percentage, the Principal
Allocation Percentage, the Certificate Principal Percentage, the Class A-1
Allocation Percentage and the Class A-2 Allocation Percentage for such
Collection Period; (c) the total amount, if any, distributed on the Class A-1
Certificates and the Class A-2 Certificates; (d) the amount of such
distribution allocable to principal on each Class of Series 1999-2
Certificates; (e) the amount of such distribution allocable to interest on
each Class of Series 1999-2 Certificates; (f) the Investor Default Amount for
such Distribution Date; (g) the Draw Amount, if any, for such Collection
Period; (h) the amount of the Class A-1 Investor Charge-Offs and Class A-2
Investor Charge-Offs and the amounts of reimbursements thereof for such
Collection Period; (i) the amount of the Monthly Servicing Fee for such
Collection Period; (j) the Class A-1 Controlled Distribution Amount and Class
A-2 Controlled Distribution Amount for the following Distribution Date; (k)
the Invested Amount, the Excess Funding Amount and the outstanding principal
balance of each Class of Series 1999-2 Certificates for such Distribution
Date (after giving effect to all distributions which will occur on such
Distribution Date); (1) the "pool factor" for each Class of Series 1999-2
Certificates as of the Determination Date with respect to such Distribution
Date (consisting of an eleven-digit decimal expressing the Invested Amount of
such Class as of such Determination Date (determined after taking into
account any reduction in such Invested Amount which will occur on such
Distribution Date) as a proportion of the Initial Invested Amount of such
Class); (m) the Available Subordinated Amount for such Determination Date;
(n) the Reserve Fund balance for such date; and (o) the Principal Funding
Account Balance and the Yield Supplement Account balance with respect to such
date.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement"), the Seller has agreed to sell to
Salomon Smith Barney Inc. (the "Underwriter"), and the Underwriter has agreed
to purchase from the Seller, all of the Series 1999-2 Certificates.
In the Underwriting Agreement, the Underwriter has agreed, subject to
the terms and conditions set forth therein, to purchase all the Series 1999-2
Certificates offered hereby if any of the Series 1999-2 Certificates are
purchased.
Distribution of the Series 1999-2 Certificates will be made from time
to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale. Proceeds to the Seller will be 99.9214% of
the aggregate principal amount of the Class A-1 Certificates and 99.9464% of
the aggregate principal amount of the Class A-2 Certificates, plus accrued
interest from May 20, 1999, before deducting expenses estimated to be
$637,300. In connection with the purchase and sale of the Series 1999-2
Certificates, the Underwriter may be deemed to have received compensation
from the Seller in the form of underwriting discounts.
The Underwriting Agreement provides that USA and CFC will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or contribute to payments which the Underwriter may be
required to make in respect thereof.
In the ordinary course of its business, the Underwriter and its
respective affiliates have engaged and may engage in investment banking
transactions with the Seller and its affiliates.
The Underwriter intends to make a secondary market in the Series 1999-2
Certificates, but has no obligation to do so. There can be no assurance that
a secondary market for the Series 1999-2 Certificates will develop or, if it
does develop, that it will continue or that it will provide holders of the
Series 1999-2 Certificates with a sufficient level of liquidity of, or
trading markets for, the Series 1999-2 Certificates.
In order to facilitate the offering of the Series 1999-2 Certificates,
the Underwriter may engage in transactions that stabilize, maintain or
otherwise affect the price of the Series 1999-2 Certificates. Specifically,
the Underwriter may overallot in connection with the offering, creating a
short position in
S-37
the Series 1999-2 Certificates for its own account. In addition, to cover
overallotments or to stabilize the price of the Series 1999-2 Certificates,
the Underwriter may bid for, and purchase, the Series 1999-2 Certificates in
the open market. Any of these activities may stabilize or maintain the market
price of the 1999-2 Certificates above independent market levels. The
Underwriter is not required to engage in these activities, and may end any of
these activities at any time.
LEGAL MATTERS
Certain legal matters relating to the Series 1999-2 Certificates will
be passed upon for USA by Christopher A. Taravella, Esq., Vice President and
General Counsel of Chrysler Financial Company L.L.C., and for the Underwriter
by Cravath, Swaine & Moore, New York, New York. Certain Federal income tax
and ERISA matters will be passed upon for USA and the Trust by Cravath,
Swaine & Moore. In addition to representing the Underwriter, Cravath, Swaine
& Moore from time to time represents Chrysler Financial Company L.L.C. and
its affiliates. See "Legal Matters" in the Prospectus.
S-38
INDEX OF PRINCIPAL TERMS
Term Page
---- ----
Accounts ............................................ S-12
Accumulation Period ................................. S-5
Assets Receivables Rate ............................. S-17
Available Certificateholder Principal Collections ... S-23
Available Seller's Collections ...................... S-24
Available Seller's Interest Collections ............. S-24
Available Seller's Principal Collections ............ S-25
Available Subordinated Amount ....................... S-5
Calculation Agent ................................... S-17
Carry-over Amount ................................... S-9
Certificateholder Interest Collections .............. S-28
Certificate Principal Percentage .................... S-23
CFC ................................................. S-4
CFC Corp. ........................................... S-10
Chrysler ............................................ S-4
Class ............................................... S-4
Class A-1 Accumulation Period Length ................ S-19
Class A-2 Accumulation Period Length ................ S-20
Class A-1 Accumulation Period Length Commencement
Date .............................................. S-19
Class A-2 Accumulation Period Length Commencement
Date .............................................. S-20
Class A-1 Allocation Percentage ..................... S-28
Class A-2 Allocation Percentage ..................... S-28
Class A-1 Available Certificateholder Principal
Collections ....................................... S-31
Class A-2 Available Certificateholder Principal
Collections ....................................... S-31
Class A-1 Carry-over Amount ......................... S-18
Class A-2 Carry-over Amount ......................... S-18
Class A-1 Certificates .............................. S-4
Class A-2 Certificates .............................. S-4
Class A-1 Certificateholders' Interest .............. S-18
Class A-2 Certificateholders' Interest .............. S-18
Class A-1 Certificate Rate .......................... S-17
Class A-2 Certificate Rate .......................... S-17
Class A-1 Controlled Accumulation Amount ............ S-31
Class A-2 Controlled Accumulation Amount ............ S-32
Class A-1 Controlled Deposit Amount ................. S-31
Class A-2 Controlled Deposit Amount ................. S-32
Class A-1 Expected Payment Date ..................... S-15
Class A-2 Expected Payment Date ..................... S-15
Class A-1 Initial Invested Amont .................... S-23
Class A-2 Initial Invested Amont .................... S-23
Class A-1 Invested Amount ........................... S-22
Class A-2 Invested Amount ........................... S-23
Class A-1 Investor Charge-off ....................... S-34
Class A-2 Investor Charge-off ....................... S-34
Class A-1 Monthly Interest .......................... S-17
Class A-2 Monthly Interest .......................... S-17
Class A-1 Monthly Principal ......................... S-31
Class A-2 Monthly Principal ......................... S-31
Class A-1 Revolving Period .......................... S-18
Class A-2 Revolving Period .......................... S-18
Class A-1 Termination Date.............. ............. S-36
Class A-2 Termination Date .......................... S-36
S-39
DaimlerChrysler ..................................... S-4
DaimlerChrysler AG .................................. S-10
Deficiency Amount ................................... S-25
Distribution Date ................................... S-4
Distribution Date Statement ......................... S-36
Draw Amount ......................................... S-25
DTC ................................................. S-6
Early Amortization Period ........................... S-5
Excess Funding Account .............................. S-8
Excess Principal Collections ........................ S-6
Excess Reserve Fund Required Amount ................. S-29
Excess Seller's Percentage .......................... S-25
Excluded Dealers .................................... S-12
Excluded Receivables ................................ S-12
Floating Allocation Percentage ...................... S-22
Incremental Subordinated Amount ..................... S-26
Initial Invested Amount ............................. S-23
Interest Payment Date ............................... S-4
Invested Amount ..................................... S-4
Investment Proceeds ................................. S-28
Investor Charge-Off ................................. S-32
LIBOR ............................................... S-17
LIBOR Determination Date ............................ S-17
Monthly Interest .................................... S-17
Nonprincipal Period ................................. S-22
pool factor ......................................... S-37
Principal Allocation Percentage ..................... S-22
Principal Funding Account ........................... S-32
Principal Funding Account Balance ................... S-32
Principal Shortfalls ................................ S-24
Record Date ......................................... S-34
Required Participation Percentage ................... S-6
Required Subordinated Amount ........................ S-25
Reserve Fund ........................................ S-6
Reserve Fund Deposit Amount ......................... S-28
Reserve Fund Required Amount ........................ S-28
Seller .............................................. S-4
Seller's Interest ................................... S-5
Seller's Participation Amount ....................... S-25
Seller's Percentage ................................. S-25
Series 1999-2 Certificates .......................... S-4
Series 1999-2 Certificateholders' Interest .......... S-18
Series Cut-Off Date ................................. S-4
Series Issuance Date ................................ S-4
Series Supplement ................................... S-16
Servicer ............................................ S-4
Servicing Fee Rate .................................. S-7
Subordinated Percentage ............................. S-26
Telerate Page 3750 .................................. S-17
Trust ............................................... S-4
Trustee ............................................. S-4
S-40
Underwriter.......................................... S-37
Underwriting Agreement .............................. S-37
USA ................................................. S-4
Yield Supplement Account ............................ S-6
Yield Supplement Account Required Amounts ........... S-29
S-41
ANNEX I
OTHER SERIES OF INVESTOR CERTIFICATES
This Annex I sets forth the principal characteristics of (i) the
Floating Rate Auto Loan Asset Backed Certificates, Series 1994-1, (ii) the
Floating Rate Auto Loan Asset Backed Certificates, Series 1995-2, (iii) the
Floating Rate Auto Loan Asset Backed Certificates, Series 1995-5, (iv) the
Floating Rate Auto Loan Asset Backed Certificates, Series 1996-1, (v) the
Floating Rate Auto Loan Asset Backed Certificates, Series 1996-2, (vi) the
6.689% Auto Loan Asset Backed Certificates, Series 1997-1, (vii) the Floating
Rate Auto Loan Asset Backed Certificates, Series 1998-1 and (viii) the Fixed
Rate Auto Loan Asset Backed Certificates, Series 1999-1 ("Series 1994-1",
"Series 1995-1", "Series 1995-5", "Series 1996-1", "Series 1996-2", "Series
1997-1", "Series 1998-1" and "Series 1999-1", respectively). For more
specific information with respect to any Series, any prospective investor
should contact USA at (248) 948-3031. USA will provide, without charge, to
any prospective purchaser, a copy of the Disclosure Document with respect to
such Series.
1. Series 1994-1
Initial Principal Amount ............................ $500,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $500,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... September 30, 1994 to the earlier of May 1, 1999 (or
later in certain circumstances) or an Early
Amortization Event
Expected Payment Date ............................... October 1999 Distribution Date
Termination Date .................................... September 2001 Distribution Date
2. Series 1995-2
Initial Principal Amount ............................ $600,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $600,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... February 28, 1995 to the earlier of October 1, 1999
(or later in certain circumstances) or an Early
Amortization Event
Expected Payment Date ............................... March 2000 Distribution Date
Termination Date .................................... February 2002 Distribution Date
3. Series 1995-5
Initial Principal Amount ............................ $250,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $250,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... November 30, 1995 to the earlier of September 1, 1999
(or later in certain circumstances) or an Early
Amortization Event
Expected Payment Date ............................... February 2000 Distribution Date
Termination Date .................................... January 2002 Distribution Date
SA-1
4. Series 1996-1
Initial Principal Amount ............................ $500,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $500,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... October 31, 1996 to the earlier of June 1, 2003 (or
later in certain circumstances) or an Early
Amortization Event
Expected Payment Date ............................... November 2003 Distribution Date
Termination Date .................................... October 2005 Distribution Date
5. Series 1996-2
Initial Principal Amount ............................ $500,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $500,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... November 30, 1996 to the earlier of November 1, 2000
(or later in certain circumstances) or an Early
Amortization Event
Expected Payment Date ............................... December 2001 Distribution Date
Termination Date .................................... November 2003 Distribution Date
6. Series 1997-1
Initial Principal Amount ............................ $700,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount ............................ $700,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period .................................... July 31, 1997 to the earlier of July 1, 2000, a
Reinvestment Event or an Early Amortization Event
Expected Payment Date ............................... August 2004 Distribution Date
Termination Date .................................... August 2006 Distribution Date
7. Series 1998-1
Initial Principal Amount
Class A-1 Certificates ............................ $500,000,000
Class A-2 Certificates ............................ $500,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount
Class A-1 Certificates ............................ $500,000,000
Class A-2 Certificates ............................ $500,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.1% of the Invested Amount
Revolving Period
Class A-1 Certificates ............................ July 1, 1998 to the earlier of January 1, 2001 (or
later in certain circumstances) or an Early
Amortization Event
Class A-2 Certificates ............................ July 1, 1998 to the earlier of January 1, 2003 (or
later in certain circumstances) or an Early
Amortization Event
SA-2
Expected Payment Date
Class A-1 Certificates ............................ March 2001 Distribution Date
Class A-2 Certificates ............................ March 2002 Distribution Date
Termination Date
Class A-1 Certificates ............................ March 2003 Distribution Date
Class A-2 Certificates ............................ March 2004 Distribution Date
8. Series 1999-1
Initial Principal Amount
Class A-1 Certificates ............................ $400,000,000
Class A-2 Certificates ............................ $600,000,000
Scheduled Interest Payment Date ..................... Monthly, on or about the fifteenth day of each month
Current Principal Amount
Class A-1 Certificates ............................ $400,000,000
Class A-2 Certificates ............................ $600,000,000
Required Participation Percentage ................... 103%
Initial Subordinated Amount ......................... Approximately 11.7% of the Invested Amount
Revolving Period
Class A-1 Certificates ............................ March 1, 1999 to the earlier of October 1, 2000 (or
later in certain circumstances) or an Early
Amortization Event
Class A-2 Certificates ............................ March 1, 1999 to the earlier of October 1, 2001 (or
later in certain circumstances) or an Early
Amortization Event
Expected Payment Date
Class A-1 Certificates ............................ March 2001 Distribution Date
Class A-2 Certificates ............................ March 2002 Distribution Date
Termination Date
Class A-1 Certificates ............................ March 2003 Distribution Date
Class A-2 Certificates ............................ March 2004 Distribution Date
SA-3
PROSPECTUS
CARCO Auto Loan Master Trust
Auto Loan Asset Backed Certificates
U.S. AUTO RECEIVABLES COMPANY, Seller
CHRYSLER FINANCIAL COMPANY L.L.C., Servicer
U.S. Auto Receivables Company ("USA" or the "Seller") has previously
sold and may sell from time to time one or more series (each a "Series") of
auto loan asset backed certificates (the "Certificates") evidencing undivided
interests in certain assets of Carco Auto Loan Master Trust (the "Trust")
created pursuant to a Pooling and Servicing Agreement among USA, Chrysler
Financial Company L.L.C., as servicer ("CFC" or the "Servicer"), and The Bank
of New York, as trustee. The Trust assets include wholesale receivables (the
"Receivables") generated from time to time in a portfolio of revolving
financing arrangements (the "Accounts") with automobile dealers to finance
their automobile and light duty truck inventory and collections on the
Receivables, as more fully described herein and, with respect to any Series,
in an accompanying prospectus supplement (a "Prospectus Supplement") relating
to such Series.
Certificates have previously been sold by the Trust and additional
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series or Class at the time of the sale and described in
the related Prospectus Supplement. Each Series will consist of one or more
classes of Certificates (each a "Class"). Certain assets of the Trust will be
allocated to the Certificateholders of each Series or Class including the
right to receive a varying percentage of each month's collections with
respect to the Receivables at the times and in the manner described herein
and, with respect to any Series offered hereby, in the related Prospectus
Supplement. The Seller will own the remaining interest in the Trust not
represented by the Certificates (the "Seller's Interest"). The Seller's
Interest will be subordinated to the rights of the Certificateholders of each
Series to the limited extent described, with respect to any Series offered
hereby, in the related Prospectus Supplement. In addition, each Series
offered hereby may be entitled to the benefits of a letter of credit, surety
bond, cash collateral account or other form of enhancement as specified in
the Prospectus Supplement relating to such Series.
While the specific terms of any Series in respect of which this
Prospectus is being delivered will be described in the related Prospectus
Supplement, the terms of such Series will not be subject to prior review by,
or consent of, the holders of the Certificates of any previously issued
Series.
Prospective investors should consider, among other things, the
information set forth in "Risk Factors" commencing on page 16 and in the
related Prospectus Supplement.
THE CERTIFICATES REPRESENT BENEFICIAL INTERESTS IN THE TRUST ONLY AND DO NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY
AFFILIATE THEREOF. NEITHER THE CERTIFICATES NOR THE RECEIVABLES ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Certificates may be sold by the Seller directly to purchasers, through
agents designated from time to time, through underwriting syndicates led by
one or more managing underwriters or through one or more underwriters acting
alone. If underwriters or agents are involved in the offering of the
Certificates of any Series offered hereby, the name of the managing
underwriter or underwriters or agents will be set forth in the related
Prospectus Supplement. If an underwriter, agent or dealer is involved
in the offering of the Certificates of any Series offered hereby, the
underwriter's discount, agent's commission or dealer's purchase price will be
set forth in, or may be calculated from, the related Prospectus Supplement,
and the net proceeds to the Seller from such offering will be the public
offering price of such Certificates less such discount in the case of an
underwriter, the purchase price of such Certificates less such commissions in
the case of an agent or the purchase price of such Certificates in the case
of a dealer, and less, in each case, the other expenses of the Seller
associated with the issuance and distribution of such Certificates. See "Plan
of Distribution".
This Prospectus may not be used to consummate sales of Certificates of any
Series unless accompanied by the related Prospectus Supplement.
The date of this Prospectus is March 1, 1999.
AVAILABLE INFORMATION
The Seller has filed a Registration Statement (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with the Securities and Exchange Commission (the "Commission") with
respect to the Certificates offered pursuant to this Prospectus. This
Prospectus, which forms part of the Registration Statement, does not contain
all of the information contained in the Registration Statement and the
exhibits thereto. For further information, reference is made to the
Registration Statement and amendments thereof and exhibits thereto, which are
available for inspection without charge at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549; 75 Park Place, New York, New York 10007; and Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of the
Registration Statement and amendments thereof and exhibits thereto may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, monthly and annual
unaudited reports, containing information concerning the Trust and prepared
by the Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC") and registered holder of
the Certificates, pursuant to the Pooling and Servicing Agreement. Such
reports may be available to holders of interests in the Certificates (the
"Certificateholders") upon request to their respective Participants. See
"Description of the Certificates -- Reports" and " -- Evidence as to
Compliance". The Trust will file with the Commission such periodic reports
with respect to the Trust as are required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Servicer, on
behalf of the Trust, are incorporated in this Prospectus by reference: the
Trust's Annual Report on Form 10-K for the year ended December 31, 1997; and
the Trust's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998. All reports and other documents
filed by the Seller, as originator of any Trust, pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Certificates
offered hereby shall be deemed to be incorporated by reference in this
Prospectus and to be part hereof. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Seller will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated herein or in any related Prospectus
Supplement by reference, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests for such copies should be directed to Secretary, Chrysler Financial
Company L.L.C., 27777 Franklin Road, Southfield, Michigan 48034-8286
(telephone: 248-948-3058).
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference
to the information with respect to the Certificates of any Series or Class
offered hereby contained in the related Prospectus Supplement to be prepared
and delivered in connection with the offering of such Certificates. Reference
is made to the Index of Principal Terms for the location herein of the
definitions of certain capitalized terms used herein.
Title of Securities ..... Auto Loan Asset Backed Certificates (the
"Certificates").
Issuer .................. CARCO Auto Loan Master Trust (the "Trust").
Seller .................. The "Seller" is U.S. Auto Receivables Company
("USA"), a special- purpose wholly owned subsidiary
of Chrysler Financial Company L.L.C. ("CFC").
Servicer ................ CFC, a wholly owned subsidiary of DaimlerChrysler
Corporation ("DaimlerChrysler"), the successor to
Chrysler Corporation.
Trustee ................. The Bank of New York (the "Trustee").
The Trust ............... The Trust was formed pursuant to a Pooling and
Servicing Agreement dated as of May 31, 1991, among
Chrysler Auto Receivables Company ("CARCO"), as
seller, Chrysler Credit Corporation ("CCC"), as
servicer, and Manufacturers and Traders Trust
Company, as trustee (as supplemented and amended
from time to time, the "Pooling and Servicing
Agreement"). The assets of the Trust include (a)
certain Receivables existing under the Accounts at
the close of business on May 31, 1991 (the "Initial
Cut-Off Date"), certain Receivables generated under
the Accounts from time to time thereafter during
the term of the Trust as well as certain
Receivables generated under any Accounts added to
the Trust from time to time (but excluding
Receivables generated in any Accounts removed from
the Trust from time to time after the Initial
Cut-Off Date), (b) all funds collected or to be
collected in respect of such Receivables, (c) all
funds on deposit in certain accounts of the Trust,
(d) any other Enhancement issued with respect to
any particular Series or Class and (e) a security
interest in certain motor vehicles (the "Vehicles")
and certain parts inventory, equipment, fixtures,
service accounts and, in some cases, realty and/or
a personal guarantee (collectively, the "Collateral
Security") securing the Receivables. The term
"Enhancement" shall mean, with respect to any
Series or Class, any letter of credit, surety bond,
cash collateral account, spread account, guaranteed
rate agreement, swap or other interest rate
protection agreement, maturity liquidity facility,
tax protection agreement, or other arrangement for
the benefit of Certificateholders of such Series or
Class.
CARCO Transfer .......... On August 8, 1991, CARCO, in accordance with the
terms of the Pooling and Servicing Agreement and
the Receivables Purchase Agreement, transferred the
Seller's Interest and all its rights and
obligations under (a) the Pooling and Servicing
Agreement (including rights and obligations as
seller thereunder) and (b) the Receivables Purchase
Agreement (including rights and obligations as
buyer thereunder) to USA, such transfer being the
"CARCO Transfer". See "U.S. Auto Receivables
Company and the Trust".
3
CCC Merger into
CFC Corp.; CFC Corp.
Merger into CFC ...... On December 31, 1995, CCC, a wholly owned
subsidiary of Chrysler Financial Corporation ("CFC
Corp."), merged into CFC Corp. CFC Corp., in
accordance with the terms of the Pooling and
Servicing Agreement and the Receivables Purchase
Agreement, assumed all the rights and obligations
of CCC under (a) the Pooling and Servicing
(including rights and obligations as servicer
thereunder) and (b) the Receivables Purchase
Agreement (including rights and obligations of the
seller thereunder).
On October 25, 1998, CFC Corp. merged into CFC.
CFC, in accordance with the terms of the Pooling
and Servicing Agreement and the Receivables
Purchase Agreement, assumed all the rights and
obligations of CFC Corp. under (a) the Pooling and
Servicing Agreement (including rights and
obligations as Servicer thereunder) and (b) the
Receivables Purchase Agreement (including rights
and obligations of the Seller thereunder). See
"Chrysler Financial Company L.L.C., Chrysler
Financial Corporation and Chrysler Credit
Corporation".
Trustee Assignment ...... On August 23, 1996, The Bank of New York, a New
York banking corporation, succeeded Manufacturers
and Traders Trust Company, as Trustee in accordance
with the terms of the Pooling and Servicing
Agreement and pursuant to an Agreement of
Resignation, Appointment and Acceptance dated as of
August 23, 1996 between USA, CFC, as succesor to
CFC Corp., Manufacturers and Traders Trust Company,
as resigning trustee, and The Bank of New York, as
successor trustee. See "Description of the
Certificates -- The Trustee".
The Accounts ............ The Accounts pursuant to which the Receivables have
been or will be generated are revolving credit
agreements entered into with CFC, directly or as
successor to CFC Corp. or CCC, by dealers to
finance the purchase of their automobile and light
duty truck inventory. The Accounts are selected
from all such credit agreements of CFC which meet
the criteria provided in the Pooling and Servicing
Agreement (the "Eligible Accounts"). Under certain
circumstances Accounts may be added to, or removed
from, the Trust. See "The Accounts", "Description
of the Certificates -- Eligible Accounts and
Eligible Receivables", " -- Addition of Accounts"
and " -- Removal of Accounts".
The Receivables ......... The Receivables have arisen or will arise in the
Accounts. The Receivables consist of advances made
directly or indirectly by CFC, directly or as
successor to CFC Corp. or CCC, to domestic
automobile dealers franchised by DaimlerChrysler
and/or other automobile manufacturers (the
"Dealers"). Such advances are used by the Dealers
to purchase the Vehicles, which consist primarily
of new automobiles, light duty trucks and certain
other vehicles manufactured or distributed by such
automobile manufacturers. Generally, the principal
amount of an advance in respect of a Vehicle is
equal to the wholesale purchase price of the
Vehicle plus destination charges and, subject to
certain exceptions, is due upon the retail sale of
the Vehicle. See "The Dealer Floorplan Financing
Business -- Creation of Receivables" and " --
Payment Terms ". Collections of principal under the
4
Receivables are herein referred to as "Principal
Collections", and collections of interest and other
nonprincipal charges (including insurance service
fees, amounts recovered with respect to Defaulted
Receivables and insurance proceeds) are referred to
herein as "Interest Collections". The Receivables
bear interest at a floating rate generally based on
the prime rates of certain United States banks plus
a spread generally based on the amount of the
related Dealer's credit line. See "The Dealer
Floorplan Financing Business -- Revenue
Experience".
USA, as assignee of CARCO, has entered into a
Receivables Purchase Agreement (the "Receivables
Purchase Agreement"), dated as of the date of the
Pooling and Servicing Agreement, between USA, as
purchaser, and CFC, as successor to CFC Corp. and
CCC, as seller (the "RPA Seller"). Pursuant to the
Receivables Purchase Agreement, the RPA Seller has
(a) sold to USA all of its right, title and
interest in and to all Receivables meeting certain
eligibility criteria contained in the Receivables
Purchase Agreement and the Pooling and Servicing
Agreement ("Eligible Receivables") and (b) assigned
its interests in the Vehicles and the Collateral
Security to USA. USA in turn transferred such
Receivables and Collateral Security to the Trust
pursuant to the Pooling and Servicing Agreement.
USA has also assigned to the Trust its rights with
respect to the Receivables under the Receivables
Purchase Agreement. See "Description of the
Receivables Purchase Agreement".
All new Receivables arising under the Accounts
during the term of the Trust will be sold by the
RPA Seller to USA and transferred by USA to the
Trust. Accordingly, the aggregate amount of
Receivables in the Trust will fluctuate from day to
day as new Receivables are generated and as
existing Receivables are collected, charged off as
uncollectible or otherwise adjusted.
The Certificates ........ The Certificates will be issued in Series, each of
which will consist of one or more Classes. While
the specific terms of any Series or Class offered
hereby will be described in the related Prospectus
Supplement, the terms of such Series or Class will
not be subject to prior review by, or consent of,
the holders of the Certificates of any previously
issued Series. There can be no assurance that the
terms of any Series issued from time to time
hereafter might not have an impact on the timing or
amount of payments received by a Certificateholder.
See "Description of the Certificates -- New
Issuances".
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of a Series
offered hereby will be available for purchase in
minimum denominations of $1,000 and in integral
multiples thereof and will only be available in
book-entry form except in certain limited
circumstances as described herein under
"Description of the Certificates -- Definitive
Certificates". The Trust's assets will be allocated
in part to the Certificateholders of each Series
(with respect to any particular Series or all
Series, the "Certificateholders' Interest"), with
the remainder allocated to the Seller (the
"Seller's Interest"). A portion of the Seller's
Interest will be subordinated to the
Certificateholders' Interest of each Series to the
extent described, with respect to any Series
offered hereby, in the related Prospectus
Supplement. The Certificates of each Series will
evidence an
5
undivided beneficial interest in the assets of the
Trust allocated to the Certificateholders' Interest
of such Series and will represent the right to
receive from such assets funds up to (but not in
excess of) the amounts required to make payments of
interest on and principal of such Series as
described, with respect to any Series offered
hereby, in the related Prospectus Supplement.
The principal amount of the Seller's Interest may
fluctuate as the aggregate amount of the
Receivables balance changes from time to time, as
new Series are issued and as outstanding Series
amortize.
The Certificates will represent beneficial
interests in the Trust only and will not represent
interests in or obligations of CFC or USA or any
affiliate thereof. Neither the Certificates nor the
Receivables are insured or guaranteed by CFC or USA
or any affiliate thereof or any governmental
agency.
Registration of
Certificates ......... Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series offered
hereby will initially be represented by one or more
Certificates registered in the name of Cede & Co.,
as the nominee of DTC. Unless otherwise specified
in the related Prospectus Supplement,
Certificateholders may elect to hold their
Certificates through DTC (in the United States) or
CEDEL or Euroclear (in Europe) and no person
acquiring an interest in the Certificates will be
entitled to receive a definitive certificate
representing such person's interest except in the
event that Definitive Certificates are issued under
certain limited circumstances. See "Description of
the Certificates -- Definitive Certificates".
Issuances of New Series . The Pooling and Servicing Agreement provides that,
pursuant to any one or more supplements thereto
(each, a "Series Supplement"), the Seller may cause
the Trustee to issue one or more new Series of
Certificates (a "New Issuance"). However, at all
times, the interest in the balance of principal
Receivables ("Principal Receivables") represented
by the Seller's Interest must equal or exceed a
specified amount. The Pooling and Servicing
Agreement also provides that the Seller may
specify, with respect to any Series, the Principal
Terms of the Series. The Seller may offer any
Series to the public or other investors under a
prospectus or other disclosure document in
transactions either registered under the Securities
Act or exempt from registration thereunder,
directly or through one or more underwriters or
placement agents.
Under the Pooling and Servicing Agreement and
pursuant to a Series Supplement, a New Issuance may
only occur upon delivery to the Trustee of, among
other things, the following: (a) a Series
Supplement specifying the Principal Terms of such
Series, (b) an opinion of counsel to the effect
that, for federal income and Michigan income and
single business tax purposes, (x) such issuance
will not adversely affect the characterization of
the Certificates of any outstanding Series or Class
as debt of the Seller, (y) such issuance will not
cause or constitute a taxable event to any
Certificateholders and (z) such new Series will be
characterized as debt of the Seller and (c) letters
from the Rating Agencies confirming that the
issuance of the new Series will not result in the
reduction or withdrawal of the
6
rating of any other Series or Class of Certificates
then outstanding. See "Description of the
Certificates -- New Issuances".
Allocations ............. The Certificateholders' Interest of each Series
will include the right to receive (but only to the
extent needed to make required payments under the
Pooling and Servicing Agreement) varying
percentages of Interest Collections and Principal
Collections allocated to such Certificates during
each calendar month (a "Collection Period").
Interest Collections, Principal Collections and
Defaulted Receivables for any Collection Period
will be allocated to each Series based on that
Series' Series Allocation Percentage. The Series
Allocation Percentage for any Collection Period and
any Series is the percentage obtained by dividing
(x) the Adjusted Invested Amount for that Series as
of the last day of the immediately preceding
Collection Period by (y) the sum of the aggregate
Adjusted Invested Amounts for all outstanding
Series as of such last day. The Adjusted Invested
Amount for any Collection Period and any Series is
the sum of (x) the Initial Invested Amount of such
Series, minus unreimbursed investor charge-offs
allocated to that Series as of the last day of the
immediately preceding Collection Period and (y) the
Available Subordinated Amount with respect to such
Series on the Determination Date occurring in such
Collection Period (after giving effect to the
allocations, distributions, withdrawals and
deposits to be made on the Distribution Date
following such Determination Date). Interest
Collections, Principal Collections and Defaulted
Receivables allocated to a Series will be further
allocated between the Certificateholders' Interest
of that Series (and, if applicable, of each Class
thereof) and the Seller's Interest as provided in
the related Series Supplement and, with respect to
any Series offered hereby, described in the related
Prospectus Supplement.
Interest ................ Interest on the principal balance of Certificates
of a Series or Class offered hereby will accrue at
the per annum rate either specified in or
determined in the manner specified in the related
Prospectus Supplement and will be payable to
Certificateholders of such Series or Class as and
on the dates ("Interest Payment Dates") specified
in the related Prospectus Supplement. If the
Prospectus Supplement for a Series or Class of
Certificates offered hereby so specifies, the
interest rate and Interest Payment Dates applicable
to each Certificate of that Series or Class may be
subject to adjustment from time to time, including
as a result of a decline in the interest rate borne
by the Receivables. Except as otherwise provided
herein or in the related Prospectus Supplement,
Interest Collections and certain other amounts
allocable to the Certificateholders' Interest of a
Series offered hereby will be used to make interest
payments to Certificateholders of such Series on
each Interest Payment Date with respect thereto,
provided that during any Early Amortization Period
with respect to such Series, interest will be
distributed to such Certificateholders monthly on
each Special Payment Date.
If the Interest Payment Dates for a Series or Class
occur less frequently than monthly, such
collections or other amounts (or the portion
thereof allocable to such Class) will be deposited
in one or more trust accounts (each an "Interest
Funding Account") and used
7
to make interest payments to Certificateholders of
such Series or Class on the following Interest
Payment Date with respect thereto. If a Series has
more than one Class of Certificates, each such
Class may have a separate Interest Funding Account.
Principal............... The principal of the Certificates of each Series
offered hereby will be scheduled to be paid either
in full on an expected date specified in the
related Prospectus Supplement (the "Expected
Payment Date"), in which case such Series will have
an Accumulation Period as described below under
"Accumulation Period", or in installments
commencing on a date specified in the related
Prospectus Supplement (the "Principal Commencement
Date"), in which case such Series will have a
Controlled Amortization Period as described below
under "Controlled Amortization Period". If a Series
has more than one Class of Certificates, a
different method of paying principal, Expected
Payment Date and/or Principal Commencement Date may
be assigned to each Class. The payment of principal
with respect to the Certificates of a Series or
Class offered hereby may commence earlier than the
applicable Expected Payment Date or Principal
Commencement Date, and the final principal payment
with respect to the Certificates of a Series or
Class may be made later than the applicable
Expected Payment Date or other expected date if an
Early Amortization Event occurs with respect to
such Series or Class or under certain other
circumstances described herein or in the related
Prospectus Supplement.
Certificates of a Series or Class offered hereby may
also be subject to purchase from time to time,
generally at their respective principal amounts, in
connection with a remarketing thereof if so
specified in the related Prospectus Supplement. A
purchase of Certificates of such a Series or Class
may result in a decrease in the outstanding
principal amount of such Series or Class prior to
the commencement of the Controlled Amortization
Period or Early Amortization Period with respect
thereto or the Expected Payment Date therefor. The
Prospectus Supplement for any Series subject to
purchase as described above will describe the
conditions to and procedures for any such purchase.
The proceeds of any such purchase would be paid to
the holders of the Certificates so purchased.
Excess Funding Account .. If and to the extent described in the Prospectus
Supplement relating to a Series offered hereby,
and, except to the extent so described, during any
Early Amortization Period, Reinvestment Period,
Accumulation Period or Controlled Amortization
Period with respect to such Series or any Class
thereof, proceeds of the issuance of the
Certificates of such Series not invested in
Receivables (the "Excess Funded Amount"), if any,
will be maintained in a trust account to be
established with the Trustee for the benefit of
such Series (an "Excess Funding Account"). The
Excess Funded Amount for a Series will initially
equal the excess, if any, of the initial principal
amount of such Series over the Initial Invested
Amount of such Series on the Series Issuance Date
therefor.
Except as provided below, any funds on deposit in
the Excess Funding Account for a Series will be
withdrawn and paid to the Seller or allocated to
one or more other Series which are in
8
amortization, early amortization, reinvestment or
accumulation periods to the extent of any increases
in the Invested Amount of the Series in question
generally as a result of the addition of
Receivables to the Trust. Under certain
circumstances, a portion of Principal Collections
allocable to a Series will be deposited into the
Excess Funding Account therefor. Upon the earliest
of (a) the commencement of a Reinvestment Period
with respect to a Series, (b) the commencement of
an Early Amortization Period with respect to a
Series and (c) the Distribution Date or
Distribution Dates, if any, specified in or
determined in the manner provided in the Series
Supplement for such Series, funds on deposit in the
Excess Funding Account for such Series will be
distributed to the Certificateholders of such
Series or a Class thereof or deposited into the
Principal Funding Account for such Series or a
Class thereof, if and to the extent the Series
Supplement for such Series so provides.
Revolving Period ........ The Certificates of each Series offered hereby will
have a revolving period (the "Revolving Period").
During the Revolving Period with respect to a
Series, Principal Collections and certain other
amounts otherwise allocable to the
Certificateholders' Interest of such Series
generally will be paid to the Seller, deposited to
the Excess Funding Account, if any, for such Series
or allocated to another Series (in effect, in
exchange for the allocation to the
Certificateholders' Interest of the Series in
question of an equal interest in the Receivables
balances that are new or that would otherwise be
part of the Seller's Interest or the interest of
the Certificateholders of such other Series) in
order to maintain the sum of the Invested Amount of
such Series and the Excess Funded Amount, if any,
with respect to such Series at a constant level.
The "Revolving Period" with respect to a Series
offered hereby shall be the period beginning on the
date specified in the related Prospectus Supplement
(the "Series Cut-off Date") and ending on the
earlier of (a) the day immediately preceding the
Accumulation Period Commencement Date or the
Principal Commencement Date for such Series and (b)
the business day immediately preceding the day on
which an Early Amortization Event or a Reinvestment
Event occurs with respect to such Series. See
"Description of the Certificates -- Reinvestment
Events and Early Amortization Events" for a
discussion of certain events which might lead to
the early termination of the Revolving Period and,
in certain circumstances, the recommencement of the
Revolving Period. If a Series has more than one
Class of Certificates, each such Class may have a
different Revolving Period.
Accumulation Period ..... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period or Reinvestment
Period that is not terminated in accordance with
the provisions of the related Series Supplement
commences with respect to a Series offered hereby,
the Certificates of such Series will have an
accumulation period (the "Accumulation Period"),
which will commence at the close of business on the
date specified in or determined in the manner
specified in such Prospectus Supplement and
continue until the earliest of (a) the commencement
of a Reinvestment Period with respect to such
Series, (b) the commencement of an Early
Amortization Period with respect to such
9
Series and (c) payment in full of the outstanding
principal amount of the Certificates of such
Series.
During the Accumulation Period with respect to a
Series, Principal Collections and certain other
amounts allocable to the Certificateholders'
Interest of such Series will be deposited on each
Distribution Date in a trust account established
for the benefit of the Certificateholders of such
Series (a "Principal Funding Account") and,
together, to the extent provided in the related
Series Supplement, with any amounts in the Excess
Funding Account, if any, for such Series, used to
make principal distributions to the
Certificateholders of such Series when due. The
amount to be deposited in the Principal Funding
Account for any Series offered hereby on any
Distribution Date during the Accumulation Period
for such Series may, but will not necessarily, be
limited to an amount (the "Controlled Deposit
Amount") equal to an amount specified in the
related Prospectus Supplement plus, in the case of
the Distribution Date or Distribution Dates
specified in or determined in the manner provided
in the related Series Supplement, amounts in the
Excess Funding Account, if any, for such Series
(after giving effect to any changes therein on such
date), if and to the extent so provided in the
related Series Supplement. If a Series has more
than one Class of Certificates, each Class may have
a different Accumulation Period and a separate
Principal Funding Account and Controlled Deposit
Amount. In addition, the related Prospectus
Supplement may describe certain priorities among
such Classes with respect to deposits of principal
into such Principal Funding Accounts.
Controlled Amortization
Period ............... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period or Reinvestment
Period that is not terminated in accordance with
the provisions of the related Series Supplement
commences with respect to a Series offered hereby,
the Certificates of such Series will have an
amortization period (the "Controlled Amortization
Period"), which will commence at the close of
business on the date specified in or determined in
the manner specified in such Prospectus Supplement
and continue until the earliest of (a) the
commencement of a Reinvestment Period with respect
to such Series, (b) the commencement of an Early
Amortization Period with respect to such Series and
(c) payment in full of the outstanding principal
amount of the Certificates of such Series. During
the Controlled Amortization Period with respect to
a Series, Principal Collections and certain other
amounts allocable to the Certificateholders'
Interest of such Series, together with, to the
extent provided in the related Series Supplement,
amounts in the Excess Funding Account, if any, for
such Series, will be used on each Distribution Date
to make principal distributions to
Certificateholders of such Series or any Class of
such Series then scheduled to receive such
distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on
any Distribution Date may, but will not
necessarily, be limited to an amount (the
"Controlled Amortization Amount") equal to an
amount specified in the related Prospectus
Supplement. If a Series has more than one Class of
Certificates, each Class may have a different
Controlled Amortization Period and a separate
Controlled
10
Amortization Amount. In addition, the related
Prospectus Supplement may describe certain
priorities among such Classes with respect to such
distributions.
Reinvestment Period ..... If the related Prospectus Supplement so specifies,
unless an Early Amortization Period that is not
terminated in accordance with the provisions of the
related Series Supplement commences with respect to
a Series, if a Reinvestment Event occurs with
respect to such Series, the Certificates of that
Series will have a reinvestment period (the
"Reinvestment Period") which will commence on the
day (the "Reinvestment Period Commencement Date")
on which such event has occurred and continue until
the earliest of (a) the commencement of an Early
Amortization Period with respect to such Series,
(b) the recommencement of the Revolving Period with
respect to such Series in accordance with the
related Series Supplement and (c) payment of the
outstanding principal amount of the Certificates of
such Series in full. Unless otherwise provided in
the related Series Supplement, during the
Reinvestment Period with respect to a Series,
Principal Collections and certain other amounts
allocable to the Certificateholders' Interest of
that Series will be deposited on each Distribution
Date in the Principal Funding Account for such
Series and, together with, to the extent provided
in the related Series Supplement, amounts in the
Excess Funding Account, if any, for such Series,
will be used to make principal distributions to
Certificateholders of that Series when due. The
amount to be deposited in the Principal Funding
Account for any Series on any Distribution Date
during the Reinvestment Period for such Series will
not be limited to any Controlled Deposit Amount. If
a Series has more than one Class of Certificates,
the related Prospectus Supplement may describe
certain priorities among such Classes with respect
to deposits of principal into the Principal Funding
Accounts therefor.
After the date on which the amount on deposit in
the Principal Funding Account with respect to a
Series equals the outstanding principal amount of
the Certificates of such Series (the "Fully
Reinvested Date"), Certificateholders of such
Series will no longer have any interest in the
Receivables and all the representations and
covenants of the Seller and the Servicer relating
to the Receivables, as well as certain other
provisions of the Pooling and Servicing Agreement
and all remedies for breaches thereof, will no
longer accrue to the benefit of the
Certificateholders of such Series, in each case
unless the Revolving Period with respect to such
Series recommences as provided in the related
Series Supplement. In addition, upon the occurrence
of the Fully Reinvested Date with respect to a
Series, no Interest Collections, Principal
Collections, Defaulted Receivables or Miscellaneous
Payments will be allocated to that Series unless
the Revolving Period with respect thereto
recommences as described above. Notwithstanding the
foregoing, when the final distribution has been
made with respect to each Series of Certificates or
the Fully Reinvested Date has occurred with respect
thereto, all right, title and interest in the
Receivables will be conveyed and transferred to
USA. See "Description of the Certificates --
Termination; Fully Reinvested Date".
11
Early Amortization
Period ............... During the period beginning on the day on which an
Early Amortization Event has occurred with respect
to a Series offered hereby and ending on the
earliest of the payment in full of the outstanding
principal balance of the Certificates of such
Series, the recommencement of the Revolving Period
with respect to such Series in accordance with the
related Series Supplement and the Termination Date
for such Series (the "Early Amortization Period"),
the Revolving Period, the Reinvestment Period, the
Controlled Amortization Period or the Accumulation
Period, as the case may be, with respect to such
Series, will terminate and Principal Collections
and certain other amounts allocable to the
Certificateholders' Interest of that Series will no
longer be paid to the Seller or the holders of any
other outstanding Series or deposited in a
Principal Funding Account as described above but
instead will be distributed to the
Certificateholders of such Series monthly on each
Distribution Date beginning with the Distribution
Date following the Collection Period in which an
Early Amortization Period commences with respect to
such Series. See "Description of the Certificates
-- Reinvestment Events and Early Amortization
Events" for a description of events that might
result in the commencement of an Early Amortization
Period with respect to a Series of Certificates.
During an Early Amortization Period with respect to
a Series, distributions of principal on the
Certificates of that Series will not be subject to
a Controlled Distribution Amount. In addition, on
the first Special Payment Date with respect to a
Series amounts on deposit in the Excess Funding
Account, if any, to the extent provided in the
related Series Supplement, and the Principal
Funding Account with respect to such Series or a
Class thereof will be paid to the
Certificateholders of such Series or Class up to
the outstanding principal balance of the
Certificates of such Series or Class. Each
Distribution Date with respect to any Early
Amortization Period is defined as a "Special
Payment Date".
Subordination of the
Seller's Interest;
Enhancements ......... The Seller's Interest will be subordinated to the
rights of the Certificateholders of each Series
offered hereby to the limited extent described in
the related Prospectus Supplement. If and to the
extent specified in the related Series Supplement,
additional credit enhancement with respect to a
Series or Class of Certificates may include any one
or more of the following: letters of credit, surety
bonds, cash collateral accounts, spread accounts,
guaranteed rate agreements, swaps or other interest
rate protection agreements, repurchase obligations,
other agreements with respect to third party
payments or other support, cash deposits or other
arrangements. Enhancement may also be provided to a
Series or Class of a Series by subordination
provisions which require that distributions of
principal and/or interest be made with respect to
the Certificates of that Series or Class before
distributions are made to another Series or Class.
Unless otherwise specified in the related
Prospectus Supplement, any form of Enhancement will
have certain limitations and exclusions from
coverage thereunder, which will be described in the
related Prospectus Supplement.
12
Excluded Series ......... A Series of Certificates may be designated as an
excluded series (an "Excluded Series") with respect
to a Series of Certificates previously issued by the
Trust as to which the Accumulation Period or
Controlled Amortization Period has commenced (a
"Paired Series").
Each Excluded Series will be prefunded with an
initial deposit to a prefunding account in an amount
equal to the initial principal balance of such
Excluded Series and primarily from the proceeds of
the offering of such Excluded Series. Any such
prefunding account will be held for the benefit of
such Excluded Series and not for the benefit of the
Paired Series. As funds are accumulated in the
Principal Funding Account for such Paired Series or
distributed to holders of Certificates of such
Paired Series, an equal amount of funds on deposit
in any prefunding account for such prefunded
Excluded Series will be released (which funds will
be distributed to the Seller). Until payment in
full of the Paired Series, no Interest Collections,
Principal Collections, Defaulted Amounts or
Miscellaneous Payments will be allocated to the
related Excluded Series. In addition, it is
expected that any Excluded Series will be excluded
from the calculation of the Required Participation
Amount as described under "Description of the
Certificates -- Addition of Accounts". collections
on the Receivables and will, in most circumstances,
deposit such collections in the Collection Account
within two business days following the receipt
thereof, generally up to the amount of such
collections required to be distributed to
Certificateholders with respect to the related
Collection Period. In certain limited
circumstances, the Servicer will be permitted to
use for its own benefit and not segregate
collections on the Receivables received by it
during each Collection Period until no later than
the business day prior to the related Distribution
Date or, provided that no Series issued prior to
the date of this Prospectus is outstanding, no
later than such Distribution Date. See "Description
of the Certificates -- Allocation of Collections;
Deposits in Collection Account".
On the second business day preceding each
Distribution Date (each a "Determination Date"),
the Servicer will calculate the amounts to be
allocated in respect of collections on Receivables
received with respect to the related Collection
Period to the Certificateholders of each
outstanding Series or Class or to the Seller in
accordance with the Series Supplements. See
"Description of the Certificates -- Allocation of
Collections; Deposits in Collection Account" and
"Special Considerations -- Certain Legal Aspects".
In certain limited circumstances CFC may resign or
be removed as Servicer, in which event either the
Trustee or, so long as it meets certain eligibility
standards set forth in the Pooling and Servicing
Agreement, a third-party servicer may be appointed
as successor servicer (CFC or any such successor
Servicer is referred to herein as the "Servicer").
CFC is permitted to delegate any of its duties as
Servicer to any of its affiliates, but any such
delegation will not relieve the Servicer of its
obligations under the Pooling and Servicing
Agreement. The Servicer will receive a monthly
servicing fee and certain other amounts as
described herein as servicing compensation from the
Trust. See "Description of the Certificates --
Servicing Compensation and Payment of Expenses".
13
Mandatory Reassignment
and Transfer of
Certain Receivables .. The Seller has made certain representations and
warranties in the Pooling and Servicing Agreement
with respect to the Receivables in its capacity as
Seller and CFC has made certain representations and
warranties in the Pooling and Servicing Agreement
in its capacity as Servicer. Such representations
and warranties will be reaffirmed as of each Series
Cut-Off Date. If the Seller breaches certain of its
representations and warranties with respect to any
Receivables and such breach remains uncured for a
specified period and has a materially adverse
effect on the Certificateholders' Interest, the
Certificateholders' Interest in such Receivables
will, subject to certain conditions specified
herein, be reassigned to the Seller. If CFC, as
Servicer, fails to comply in all material respects
with certain covenants or warranties with respect
to any Receivables and such noncompliance is not
cured within a specified period after CFC becomes
aware or receives notice thereof from the Trustee
and such noncompliance has a materially adverse
effect on the Certificateholders' Interest therein,
the Certificateholders' Interest in all Receivables
affected will be purchased by CFC. In the event of
a transfer of servicing obligations to a successor
Servicer, such successor Servicer, rather than CFC,
would be responsible for any failure to comply with
the Servicer's covenants and warranties arising
thereafter.
Tax Matters ............. In the opinion of special tax counsel for the
Seller and the Trust, the Certificates of each
Series offered hereby will be characterized as debt
of the Seller for federal income tax purposes and,
in the opinion of Michigan counsel for the Seller
and the Trust, the Certificates will be
characterized as debt of the Seller for Michigan
income and single business tax purposes. Each
Certificateholder, by the acceptance of a
Certificate offered hereby, will agree to treat
such Certificates as indebtedness of the Seller for
federal, state and local income and single business
tax purposes. The Certificates might be issued with
original issue discount. See "Certain Tax Matters"
for additional information concerning the
application of federal and Michigan tax laws.
ERISA Considerations .... Under a regulation issued by the Department of
Labor, and unless otherwise specified in the
related Prospectus Supplement, the Trust's assets
would not be deemed "plan assets" of any employee
benefit plan holding interests in the Certificates
of any Series offered hereby or, if such Series has
more than one Class, any such Class if certain
conditions are met, including that interests in the
Certificates of such Series or, in the case of a
Series with more than one Class, such Class be held
by at least 100 independent persons upon completion
of the public offering of such Certificates being
made hereby. Based on information provided by the
underwriter or placement agent for a Series, the
Seller will notify the Trustee as to whether or not
Certificates of that Series or, in the case of a
Series with more than one Class, each such Class
will be held by at least 100 separately named
persons at the conclusion of the offering thereof.
The Seller will not, however, determine whether the
100-investor requirement of the exception for
publicly offered securities is satisfied as to the
Certificates of any Series or Class. If the Trust's
assets were deemed to be "plan assets"
14
of such a plan, there is uncertainty as to whether
existing exemptions from the "prohibited
transaction" rules of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"),
would apply to all transactions involving the
Trust's assets. Accordingly, employee benefit plans
contemplating purchasing interests in the
Certificates of any Series or Class should consult
their counsel before making a purchase. See "ERISA
Considerations".
Certificate Ratings ..... Unless otherwise specified in the related
Prospectus Supplement, it will be a condition to
the issuance of the Certificates of each Series
offered hereby that they be rated in the highest
long-term rating category by at least one
nationally recognized rating agency. A security
rating is not a recommendation to buy, sell or hold
securities and is subject to revision or withdrawal
in the future by the assigning rating agency. See
"Risk Factors -- Ratings of the Certificates".
15
RISK FACTORS
Limited Liquidity. It is anticipated that, to the extent permitted, the
underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but will not be under any obligation to do so. There
can be no assurance that a secondary market will develop with respect to the
Certificates of any Series offered hereby or, if such a secondary market does
develop, that it will provide the holders of such Certificates with liquidity
of investment or that it will continue for the life of such Certificates.
Certain Legal Aspects. There are certain limited circumstances under
the Uniform Commercial Code (the "UCC") and applicable federal law in which
prior or subsequent transferees of Receivables could have an interest in such
Receivables with priority over the Trust's interest. See "Certain Legal
Aspects of the Receivables -- Transfer of Receivables". Under the Receivables
Purchase Agreement, the RPA Seller has warranted to the Seller and, under the
Pooling and Servicing Agreement, the Seller has warranted to the Trust that
the Receivables have been or will be transferred free and clear of the lien
of any third party. Each of the RPA Seller and the Seller has also covenanted
that it will not sell, pledge, assign, transfer or grant any lien on any
Receivable or, except as described under "Description of the Certificates --
The Seller's Certificate", the Seller's Certificate (or any interest therein)
other than to the Trust.
The RPA Seller has warranted to the Seller in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Seller is a valid
sale of the Receivables to the Seller. In addition, the RPA Seller and the
Seller have and will treat the transactions described herein as a sale of the
Receivables to the Seller and the RPA Seller has and will take all actions
that are required under Michigan law to perfect the Seller's ownership
interest in the Receivables. See "Certain Legal Aspects of the Receivables --
Transfer of Receivables". Notwithstanding the foregoing, if the RPA Seller
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables to the Seller should be recharacterized
as a pledge of such Receivables to secure a borrowing of such debtor, then
delays in payments of collections of Receivables to the Seller could occur or
(should the court rule in favor of any such trustee, debtor or creditor)
reductions in the amount of such payments could result. If the transfer of
Receivables to the Seller is recharacterized as a pledge, a tax or government
lien on the property of the RPA Seller arising before any Receivables come
into existence may have priority over the Seller's interest in such
Receivables. See "Certain Legal Aspects of the Receivables -- Certain Matters
Relating to Bankruptcy". If the transactions contemplated herein are treated
as a sale, except in certain limited circumstances, the Receivables would not
be part of the RPA Seller's bankruptcy estate and would not be available to
the RPA Seller's creditors.
In addition, if the RPA Seller were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to request a bankruptcy court to order that the RPA Seller be
substantively consolidated with the Seller, delays in and reductions in the
amount of distributions on the Certificates could occur.
The Seller has warranted in the Pooling and Servicing Agreement that
the transfer of the Receivables to the Trust is a sale of the Receivables to
the Trust. The Seller has and will take all actions that are required under
Michigan law to perfect the Trust's interest in the Receivables and the
Seller has warranted that the Trust will at all times have a first priority
perfected ownership interest therein and, with certain exceptions, in the
proceeds thereof. However, the transfer of the Receivables to the Trust could
be deemed to create a security interest therein. If the transfer of the
Receivables to the Trust were deemed to create a security interest therein
under the UCC as in effect in Michigan, a tax or statutory lien on property
of the RPA Seller or the Seller arising before a Receivable is transferred to
the Trust may have priority over the Trust's interest in such Receivables. If
the Seller were to become a debtor in a bankruptcy case and a bankruptcy
trustee or the Seller as debtor in possession or a creditor of the Seller
were to take the position that the transfer of the Receivables from the
Seller to the Trust should be recharacterized as a pledge of such
Receivables, then delays in distributions on the Certificates or, should the
bankruptcy court rule in favor of any such trustee, debtor in possession or
creditor, reductions in such distributions could result.
16
In a 1993 case decided by the U.S. Court of Appeals for the Tenth
Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts", as defined under the Uniform Commercial Code, would be included
in the bankruptcy estate of a transferor regardless of whether the transfer
is treated as a sale or a secured loan. Although the Receivables are likely
to be viewed as "chattel paper", as defined under the Uniform
Commercial Code, rather than as accounts, the rationale behind the Octagon
holding is equally applicable to chattel paper. The circumstances under which
the Octagon ruling would apply are not fully known and the extent to which
the Octagon decision will be followed in other courts or outside of the Tenth
Circuit is not certain. If the holding in the Octagon case were applied in an
RPA Seller bankruptcy, however, even if the transfer of Receivables to the
Seller and the Trust were treated as a sale, the Receivables would be part of
the RPA Seller's bankruptcy estate and would be subject to claims of certain
creditors, and delays and reductions in payments to the Seller and
Certificateholders could result. See "Certain Legal Aspects of the
Receivables -- Certain Matters Relating to Bankruptcy".
If certain events relating to the bankruptcy of DaimlerChrysler, the
RPA Seller or the Seller were to occur, then a Reinvestment Event or Early
Amortization Event would occur with respect to each Series and, pursuant to
the terms of the Pooling and Servicing Agreement, additional Receivables
would not be transferred to the Trust. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables" and " -- Certain Matters Relating to
Bankruptcy".
Payments made in respect of repurchases of Receivables by the RPA
Seller or the Seller pursuant to the Pooling and Servicing Agreement may be
recoverable by the RPA Seller or the Seller as debtor in possession or by a
creditor or a trustee-in-bankruptcy of the RPA Seller or the Seller as a
preferential transfer from the RPA Seller or the Seller if such payments are
made within one year prior to the filing of a bankruptcy case in respect of
the RPA Seller or the Seller.
Application of federal and state bankruptcy and debtor relief laws
could affect the interests of the Certificateholders in the Receivables if
such laws result in any Receivables being written off as uncollectible or
result in delays in payments due on such Receivables. See "Description of the
Certificates -- Defaulted Receivables and Recoveries".
The Seller has represented and warranted in the Pooling and Servicing
Agreement that each Receivable is at the time of creation secured by a first
priority perfected security interest in the related Vehicle. Generally, under
applicable state laws, a security interest in an automobile or light duty
truck which secures wholesale financing obligations may be perfected by the
filing of UCC financing statements. The RPA Seller takes all actions
necessary under applicable state laws to perfect the RPA Seller's security
interest in the Vehicles. However, at the time a Vehicle is sold, the RPA
Seller's security interest in the Vehicle will terminate. Therefore, if a
Dealer fails to remit to the RPA Seller amounts owed with respect to Vehicles
that have been sold, the related Receivables will no longer be secured by
Vehicles.
Payments. Receivables are generally paid by Dealers upon retail sale of
the underlying Vehicle. The timing of such sales is uncertain. In addition,
there is no assurance that there will be additional Receivables created under
the Accounts or that any particular pattern of Dealer repayments will occur.
The payment of principal on the Certificates is dependent on Dealer
repayments. As a result the Certificates of any Series or Class may not be
fully amortized by the Expected Payment Date, if any, with respect to such
Series or Class and the payment to Certificateholders or deposit in a
Principal Funding Account of principal during the Controlled Amortization
Period or Accumulation Period, if any, with respect to a Series of
Certificates or a Class thereof may not equal the Controlled Amortization
Amount or Controlled Deposit Amount, if any, with respect to such Series or
Class.
Social, Economic and Other Factors. Payment of the Receivables is
largely dependent upon the retail sale of the related Vehicles. The level of
retail sales of cars and light duty trucks may change as the result of a
variety of social and economic factors. Economic factors include interest
rates, unemployment levels, the rate of inflation and consumer perception of
economic conditions generally. The use of incentive programs (e.g.,
manufacturers' rebate programs) may affect retail sales. However, the Seller
is unable to determine and has no basis to predict whether or to what extent
economic or social factors will affect the level of Vehicle sales.
17
Trust's Relationship to DaimlerChrysler and CFC. Neither CFC nor
DaimlerChrysler is obligated to make any payments in respect of the
Certificates of any Series or the Receivables (other than the obligation of
CFC to purchase certain Receivables from the Trust due to the failure to
comply with certain covenants, as described under "Description of the
Certificates -- Servicer Covenants"). However, the Trust is completely
dependent upon CFC for the generation of new Receivables. The ability of CFC
to generate Receivables is in turn dependent to a large extent on the sales
of automobiles and light duty trucks manufactured or distributed by
DaimlerChrysler. There can, therefore, be no assurance that CFC will continue
to generate Receivables at the same rate as Receivables were generated in
prior years. In addition, if CFC were to cease acting as Servicer,
delays in processing payments on the Receivables and information in respect
thereof could occur and result in delays in payments to the
Certificateholders.
In connection with the transfer of Receivables by the RPA Seller to the
Seller and the transfer of such Receivables by the Seller to the Trust, each
of the RPA Seller and the Seller make representations and warranties with
respect to the characteristics of such Receivables. The RPA Seller and the
Seller are required to determine the accuracy of such representations and
warranties and, in certain circumstances, they are required to purchase
Receivables with respect to which such representations and warranties have
been breached. See "Description of the Certificates -- Representations and
Warranties" and "Description of the Receivables Purchase Agreement --
Representations and Warranties". In addition, subject to certain limitations,
CFC has the ability to change the terms of the Accounts, including the rate
and the credit line, as well as change its underwriting procedures.
Under agreements between DaimlerChrysler and DaimlerChrysler-franchised
dealers, DaimlerChrysler is committed to purchase unmiled vehicles from such
dealers upon dealership termination. If DaimlerChrysler is not able to
repurchase the new vehicles under the repurchase provision of new vehicles in
the dealer agreements, losses with respect to the Receivables may be
adversely affected. See "The Dealer Floorplan Financing Business --
Relationship with DaimlerChrysler". In addition, because a substantial number
of the Vehicles to be sold by the Dealers are manufactured or distributed by
DaimlerChrysler, if DaimlerChrysler were temporarily or permanently no longer
manufacturing or distributing vehicles, the rate of sales of
DaimlerChrysler-manufactured Vehicles owned by the Dealers would decrease,
adversely affecting payment rates with respect to the Receivables, and the
loss experience with respect to the Receivables will be adversely affected.
See "The Dealer Floorplan Financing Business".
The Prospectus Supplement for any Series offered hereby may set forth
certain additional information regarding CFC and DaimlerChrysler. In
addition, DaimlerChrysler and CFC are subject to the informational
requirements of the Exchange Act and in accordance therewith file reports and
other information with the Commission. For further information regarding
DaimlerChrysler and CFC reference is made to such reports and other
information which are available as described under "Available Information".
Credit Enhancement. Credit enhancement of each Series of Certificates
offered hereby will be provided by the subordination of the Seller's Interest
to the extent of the Available Subordinated Amount for such Series as
described in the related Prospectus Supplement. The amount of such credit
enhancement is limited and will be reduced from time to time as described in
the related Prospectus Supplement. In addition, any Enhancement provided with
respect to a Series or Class of Certificates is expected to be limited. See
"Limited Subordination of Seller's Interest; Enhancements".
Control. Under certain circumstances, the consent or approval of the
holders of a specified percentage of the aggregate unpaid principal amount of
all outstanding Certificates of all outstanding Series will be required to
direct certain actions, including amending the Pooling and Servicing
Agreement in certain circumstances and directing a reassignment of the entire
portfolio of Receivables. In addition, following the occurrence of an
insolvency event with respect to the Seller, the holders of Certificates
evidencing more than 50% of the aggregate unpaid principal amount of each
Series or each Class of each Series (and any holder of a Supplemental
Certificate) will be required to direct the Trustee not to sell or otherwise
liquidate the Receivables.
Additional Series. The Trust, as a master trust, previously issued
Series and is expected to issue additional Series (which may be represented
by different Classes within a Series) from time to time. A
18
Series Supplement delivered in connection with the issuance of other Series
will specify certain Principal Terms applicable to such Series. Such
Principal Terms may include methods for determining applicable allocation
percentages and allocating collections, provisions creating different or
additional security or other credit enhancement, different Classes of
Certificates (including subordinated Classes of Certificates) and any other
amendment or supplement to the Pooling and Servicing Agreement which is made
applicable only to such Series. No Series Supplement, however, may change the
terms of the Certificates of another Series or the terms of the Pooling and
Servicing Agreement as applied to the Certificate of another Series. See
"Description of the Certificates -- New Issuances". As long as the
Certificates of any Series are outstanding, a condition to the execution of
any Series Supplement will be that the Rating Agencies shall have advised the
Trustee that the issuance of such Additional Series will not result in the
reduction or withdrawal of their rating of the Certificates of any
outstanding Series or Class of Certificates. There can be no assurance,
however, that the terms of any one Series might not have an impact on the
timing or amount of payments received by a Certificateholder of any other
Series. The issuance of an additional Series does not require the consent of
any Certificateholders.
Ratings of the Certificates. Unless otherwise specified in the related
Prospectus Supplement, it will be a condition to the issuance of the
Certificates of each Series offered hereby that they be rated in the highest
long-term rating category by at least one nationally recognized rating agency
(such rating agency and each other rating agency designated by the Seller in
the related Series Supplement in respect of any outstanding Series or Class,
a "Rating Agency"). Any rating assigned to the Certificates of a Series or a
Class by a Rating Agency will reflect such Rating Agency's assessment of the
likelihood that Certificateholders of such Series or Class will receive the
payments of interest and principal required to be made under the Pooling and
Servicing Agreement and will be based primarily on the value of the
Receivables in the Trust, the level of subordination of the Seller's Interest
and the availability of any Enhancement with respect to such Series or Class.
However, any such rating will not, unless otherwise specified in the related
Prospectus Supplement with respect to any Series or Class offered hereby,
address the likelihood that the principal of, or interest on, any
Certificates of such Series or Class will be paid on a scheduled date. The
rating will not be a recommendation to buy, hold or sell Certificates of such
Series or Class, inasmuch as such rating will not comment as to the market
price or suitability for a particular investor. There is no assurance that a
rating will remain for any given period of time or that a rating will not be
lowered or withdrawn by a Rating Agency if in its judgment circumstances in
the future so warrant.
Book-Entry Registration. Unless otherwise specified in the Prospectus
Supplement relating to a Series of Certificates offered hereby, the
Certificates of each such Series will be initially represented by one or more
certificates registered in the name of Cede, the nominee for DTC, and will
not be registered in the names of the Certificateholders or their nominees.
Accordingly, unless and until Definitive Certificates are issued
Certificateholders will not be recognized by the Trustee as
"Certificateholders" (as that term is used in the Pooling and Servicing
Agreement) and will only be able to exercise the rights of Certificateholders
indirectly through DTC and its participating organizations, and unless the
Prospectus Supplement for a Series offered hereby provides otherwise, through
Euroclear or CEDEL and their respective participating organizations. See
"Description of the Certificates -- General", " -- Book-Entry Registration"
and " -- Definitive Certificates".
U.S. AUTO RECEIVABLES COMPANY AND THE TRUST
U.S. Auto Receivables Company
USA was incorporated in the State of Delaware on June 18, 1991, as a
wholly owned subsidiary of CFC Corp., for the limited purpose of purchasing
wholesale, retail and other receivables from CFC Corp. (which has been
succeeded by CFC), CCC or CARCO and transferring such receivables to third
parties or issuing indebtedness secured by receivables to third parties.
Similarly, CARCO was incorporated in the State of Delaware on May 30, 1986,
for the limited purpose of purchasing wholesale and retail receivables from
either CFC Corp. or CCC and transferring such receivables to third parties.
On August 8, 1991, CARCO transferred the Seller's Interest and all its rights
and obligations under the Pooling and
19
Servicing Agreement and the Receivables Purchase Agreement to USA. Such
transfer (the "CARCO Transfer") was made in accordance with the terms of the
Pooling and Servicing Agreement and the Receivables Purchase Agreement and
was subject to certain conditions, including, among others that (a) CARCO,
USA and the Trustee execute and deliver an assignment and assumption
agreement; (b) CARCO deliver certain required opinions of counsel (including
an opinion of counsel that the CARCO Transfer would not adversely affect the
characterization of any outstanding Series or Class of Certificates as debt
of USA); (c) the CARCO Transfer would not result in a reduction or withdrawal
of the rating of any outstanding Series or Class of Certificates; and (d) all
filings required to continue the perfected interest of the Trustee in the
Receivables and the Collateral Security be made.
On August 8, 1991, USA was deemed to have made all representations and
warranties of the Seller in the Pooling and Servicing Agreement and any
Series Supplement with respect to any Series or Class of Certificates
outstanding at such time. In addition, upon such transfer, USA assumed the
obligations of CARCO under the Certificates with respect to any outstanding
Series, the Pooling and Servicing Agreement and the Receivables Purchase
Agreement and agreed to hold CARCO harmless from any liability related to
such obligations. Obligations transferred to and assumed by USA include
CARCO's obligation with respect to the subordinated note issued to CFC Corp.
(the owner of all the common stock of CARCO), the proceeds of which note were
used to fund a portion of the purchase price of Receivables from CCC on the
Initial Closing Date. The subordinated note is now held by CFC. CFC Corp. and
CFC have made additional subordinated loans to USA to fund a portion
of the purchase price of the Receivables arising in the Additional Accounts
added to the Trust on Addition Dates subsequent to the Initial Closing Date
and CFC may make additional subordinated loans to USA in the future.
In addition to purchasing the Receivables in connection with the
offering of the Certificates, the Seller has also purchased other receivables
from CFC Corp. and CCC in connection with other financings.
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to insure that the voluntary or involuntary
application for relief by CFC under the United States Bankruptcy Code or
similar applicable state laws ("Insolvency Laws") will not result in the
consolidation of the assets and liabilities of the Seller with those of CFC.
These steps include the creation of the Seller as a separate, limited-purpose
subsidiary pursuant to a certificate of incorporation containing certain
limitations (including restrictions on the nature of the Seller's business,
as described above, and restrictions on the Seller's ability to commence a
voluntary case or proceeding under any Insolvency Law without the unanimous
affirmative vote of all its directors). However, there can be no assurance
that the activities of the Seller would not result in a court concluding that
the assets and liabilities of the Seller should be consolidated with those of
CFC in a proceeding under any Insolvency Law. See "Risk Factors -- Certain
Legal Aspects" and "Certain Legal Aspects of the Receivables -- Certain
Matters Relating to Bankruptcy".
In addition, tax and certain other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation relating to the
underfunding of pension plans, of DaimlerChrysler or CFC can be asserted
against the Seller. To the extent that any such liabilities arise after the
transfer of Receivables to the Trust, the Trust's interest in the Receivables
would be prior to the interest of the claimant with respect to any such
liabilities. However, the existence of a claim against the Seller could
permit the claimant to subject the Seller to an involuntary proceeding under
the Bankruptcy Code or other Insolvency Law. See "Special Considerations --
Certain Legal Aspects" and "Certain Legal Aspects of the Receivables --
Certain Matters Relating to Bankruptcy" and "Risk Factors -- Trust's
Relationship to DaimlerChrysler and CFC".
USA's executive offices are located at 27777 Franklin Road, Southfield,
Michigan 48034-8286, and its telephone number is (810) 948-3031.
The Trust
The Trust was formed in accordance with the laws of the State of New
York pursuant to the Pooling and Servicing Agreement. CARCO, as the initial
Seller, and USA, as CARCO's assignee, have conveyed to the Trust, without
recourse, the Receivables arising under the Accounts. The property of the
Trust
20
consists of the Receivables existing in the Accounts on the Initial Cut-Off
Date, all Receivables generated in the Accounts from time to time thereafter
during the term of the Trust as well as Receivables generated in any Accounts
added to the Trust from time to time (but excluding Receivables in any
Accounts that are removed from the Trust from time to time after the Initial
Cut-Off Date), an assignment of all the Seller's rights and remedies under
the Receivables Purchase Agreement, all funds collected or to be collected in
respect of the Receivables, all funds on deposit in certain accounts of the
Trust, any Enhancement issued with respect to any particular Series or Class
of Certificates and a security interest in the Vehicles and any other
Collateral Security. See "Description of the Certificates -- Addition of
Accounts". See "Description of the Receivables Purchase Agreement" for a
summary of certain terms of the Receivables Purchase Agreement.
CFC will generally not convey to the Trust receivables ("Fleet
Receivables") originated in connection with multiple new vehicle orders of at
least five vehicles by certain specified Dealers. The terms Receivables and
Principal Receivables as used herein will not refer to Fleet Receivables.
The property of the Trust may also include Enhancements for the benefit
of Certificateholders of a particular Series or Class. The Certificateholders
of a particular Series or Class will not have any interest in any
Enhancements provided for the benefit of the Certificateholders of another
Series or Class, unless so provided in the related Series Supplement or
Series Supplements. Pursuant to the Pooling and Servicing Agreement, the
Seller will be allowed (subject to certain limitations and conditions), and
in some circumstances will be obligated, to designate from time to time
Additional Accounts to be included as Accounts and to convey to the Trust the
Receivables of such Additional Accounts, and to designate from time to time
certain Accounts to be removed and to require the Trustee to convey
receivables in such Removed Accounts to the Seller.
The Trust was formed for this and like transactions pursuant to the
Pooling and Servicing Agreement and prior to formation had no assets or
obligations. The Trust will not engage in any business activity other than
acquiring and holding the Receivables and the other assets of the Trust and
proceeds therefrom, issuing the Certificates and the Seller's Certificate
(and any Supplemental Certificates) and making payments thereon and related
activities. As a consequence, the Trust is not expected to have any need for,
or source of, capital resources other than the assets of the Trust.
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement: (i) the
net proceeds from the sale of the Certificates of a given Series offered
hereby will be paid to USA and used to make the deposit of the Excess Funded
Amount, if any, for such Series, to the Excess Funding Account for such
Series; (ii) USA will use the portion of such proceeds paid to it (together
with the subordinated loan from CFC described under "U.S. Auto Receivables
Company and the Trust -- U.S. Auto Receivables Company") to purchase
Receivables from CFC or to repay certain amounts previously borrowed to
purchase Receivables; and (iii) CFC will use the portion of the proceeds paid
to it for general corporate purposes.
THE DEALER FLOORPLAN FINANCING BUSINESS
General
The Receivables sold to the Trust by the Seller pursuant to the Pooling
and Servicing Agreement were or will be selected from extensions of credit
and advances (known generally as "wholesale" or "floorplan" financing) made
by DaimlerChrysler, directly or as successor to Chrysler Corporation, and
CFC, directly or as successor to CFC Corp. or CCC, to domestic motor "vehicle
dealers". Funds so advanced are used by dealers to purchase new and used
vehicles manufactured or distributed by DaimlerChrysler and other
manufacturers pending sale to retail buyers. As described herein, receivables
sold to the Trust are secured by the Vehicles and, in many cases, certain
parts inventory, equipment, fixtures and service accounts of the vehicle
dealers. In some cases, the Receivables are also secured by realty owned by,
and/or a personal guarantee of, a vehicle dealer.
21
CFC, as successor to CFC Corp. and CCC, is the primary wholesale
financing source for DaimlerChrysler-franchised dealers in the United States.
DaimlerChrysler vehicles for which CFC provides wholesale financing include
vehicles manufactured under the CHRYSLER, PLYMOUTH, DODGE and JEEP
trademarks. CFC, directly or as successor to CFC Corp. or CCC, has extended
credit lines to DaimlerChrysler-franchised dealers that also operate
non-DaimlerChrysler franchises and non-DaimlerChrysler dealers. CFC services
the accounts of domestic dealers financed by it (the "U.S. Wholesale
Portfolio") through its Southfield Support office located in Southfield,
Michigan and through a network of zone offices located throughout the United
States.
Vehicles financed by any dealer under the floor plan program are
categorized by CFC, under its policies and procedures, as New Vehicles or
Used Vehicles based on whether such vehicles qualify for the new or used
wholesale and retail interest rate chargeable to such dealer in connection
with the vehicles financed. Currently, (a) "New Vehicles" consist of (i)
current and prior model year unmiled vehicles, (ii) current model year miled
vehicles purchased at a closed auction conducted by DaimlerChrysler and (iii)
prior model year and two year old miled vehicles and (b) "Used Vehicles"
consist of previously owned vehicles (other than current model year miled
vehicles purchased at a closed auction conducted by DaimlerChrysler and prior
model year and two year old miled vehicles). Vehicles purchased by a dealer
at a closed auction conducted by DaimlerChrysler are referred to,
collectively, as "Auction Vehicles". The categorization of New Vehicles and
Used Vehicles may change in the future based on CFC's practices and policies.
Creation of Receivables
CFC finances 100% of the wholesale invoice price of new vehicles,
including destination charges. Receivables in respect of
DaimlerChrysler-manufactured or distributed vehicles are originated by
DaimlerChrysler concurrently with the shipment of such vehicles to the
financed dealer.
Once a dealer has commenced the floorplanning of a manufacturer's
vehicles through CFC, CFC will finance all purchases of vehicles by such
dealer from such manufacturer. CFC will cancel this arrangement, however, if
a dealer's inventory is considered by CFC to be seriously overstocked, if a
dealer is experiencing financial difficulties or if a dealer requests
controlled vehicle releases. In such circumstances (known as "finance hold"),
the applicable local zone office of CFC assumes control of vehicle releases
to the dealer. Special arrangements are made by CFC to finance inter-dealer
sales of vehicles.
Credit Underwriting Process
CFC extends credit to dealers from time to time based upon established
credit lines. Lines of credit may be established by dealers to finance
purchases of new, used and auction vehicles. All DaimlerChrysler- franchised
dealers that have a new vehicle line of credit in place are also eligible for
a used vehicle and an auction vehicle credit line. A new vehicle credit line
relates to New Vehicles (other than current model year miled vehicles
purchased at a closed auction conducted by DaimlerChrysler); a used vehicle
credit line relates to Used Vehicles; and an auction vehicle credit line
relates to Auction Vehicles.
A newly franchised dealer requesting the establishment of a new vehicle
credit line must submit an application to a CFC zone office. After receipt of
such application, the local zone office investigates the prospective dealer
by reviewing the prospective dealer's credit reports and bank references and
evaluating the dealer's marketing capabilities and start-up financial
resources and credit requirements. When an existing dealer requests the
establishment of a wholesale new vehicle credit line, the local zone office
reviews the dealer's credit reports (including the experience of the dealer's
current financing source) and bank references and investigates the dealer's
current state of operations and management (including evaluating a factory
reference) and marketing capabilities. For credit lines within a local zone
office's approval limits, such local zone office either approves or
disapproves the dealer's request. For credit lines in excess of a local zone
office's approval limits, such local zone office transmits the requisite
documentation to the Southfield Support Dealer Credit Department for approval
or disapproval. CFC applies the same underwriting standards for dealers
franchised by other manufacturers.
22
Upon approval, dealers execute a series of financing agreements with
CFC and, in the case of DaimlerChrysler-franchised dealers, DaimlerChrysler.
Such agreements provide CFC a first priority security interest in the
vehicles and certain other collateral and a demand master promissory note in
favor of CFC. Pursuant to such agreements, all dealers are required by CFC to
maintain insurance coverage for each vehicle for which it provided floorplan
financing, with CFC designated as loss payee.
The size of a credit line initially offered to a dealer is based upon
the dealer's sales record (or, in the case of a prospective dealer, expected
annual sales) and the dealer's effective net worth. The amount of a dealer's
credit line for new vehicles is adjusted quarterly by CFC based upon such
dealer's average new vehicle sales during the prior 180 days and is,
generally, in an amount sufficient to finance a 75-day supply of vehicles.
The amount of a dealer's credit line for used vehicles is also adjusted
periodically based upon such dealer's average used vehicle sales for the
prior 180 days and is, generally, in an amount sufficient to finance 50% of a
30 to 45-day supply of vehicles. The size of a dealer's auction vehicle
credit line is determined on a case by case basis and is adjusted
periodically based on CFC's practices and procedures.
The aggregate amount advanced for each Used Vehicle is equal to the
National Automotive Dealers Association's Official Wholesale Used Car
Trade-in Guide wholesale book value for such vehicle. However, the aggregate
amount of the credit line for such used vehicles may not exceed 50% of the
value of such dealer's total inventory of used vehicles. The amount advanced
for New Vehicles and all Auction Vehicles is equal to the amount invoiced
with respect to such vehicles and the auction purchase price (including
auction fees) of such Auction Vehicles, respectively.
Billing, Collection Procedures and Payment Terms
A statement setting forth billing and related account information is
prepared by CFC and distributed on a monthly basis to each dealer. Each
dealer's bills are generated and mailed on the sixth or seventh calendar day
of the month. Interest and other nonprincipal charges are required to be paid
by the end of the month in which they are billed. Interest and handling fees
are billed by CFC in arrears, while insurance costs are billed in advance.
Upon the sale of a vehicle for which it has provided floorplan financing, CFC
is entitled to receive payment in full of the related advance. Dealers remit
payments by check directly to CFC's local zone offices or electronically via
an electronic funds transfer system maintained by the Southfield Support
office.
Revenue Experience
CFC charges dealers interest at a floating rate based on the rate (the
"Prime Rate") designated as the "prime rate" from time to time by
certain financial institutions selected by CFC, plus a designated spread
ranging from 0.25% to 1.00% on New Vehicles. The Prime Rate is reset by CFC
on the first and sixteenth days of every month and is applied to all balances
outstanding during the applicable period. The actual spread for each dealer
is determined according to the total amount of such dealer's credit lines.
CFC generally increases the spreads charged on Used Vehicle balances by an
additional 0.75%; however, previously owned vehicles purchased at a
DaimlerChrysler closed auction are financed at the applicable New Vehicle
rate. In the case of a few larger dealers, CFC charges such dealers interest
at a floating rate based on LIBOR plus 2.75% up to the Prime Rate plus 0.50%.
Relationship with DaimlerChrysler
DaimlerChrysler provides to certain DaimlerChrysler-franchised dealers
financial assistance in the form of working capital loans and other loans. In
addition, DaimlerChrysler provides floorplan assistance to all
DaimlerChrysler-franchised dealers through a number of formal and informal
programs. On all new vehicle financings, DaimlerChrysler reimburses dealers
directly for the finance costs for a specified period from the date of
shipment. DaimlerChrysler also has a supplemental floorplan assistance
program, whereby dealers are reimbursed, at the time of retail sale, for a
specified amount depending upon the vehicle model.
23
Under an agreement between DaimlerChrysler and each
DaimlerChrysler-franchised dealer, DaimlerChrysler commits to repurchase
unsold new vehicles in inventory upon dealership termination, at such
vehicles' wholesale prices less a specified margin. DaimlerChrysler only
repurchases current model year vehicles that are new, undamaged and unused.
DaimlerChrysler also agrees to repurchase from dealers, at the time of
franchise termination, parts inventory at specified percentages of the
invoice price. If CFC takes possession of a dealer's parts inventory,
DaimlerChrysler is only obligated to pay CFC 55% of the invoice price of such
inventory. All of such assistance, however, is provided by DaimlerChrysler
for the benefit of its dealers, and does not relieve such dealers of any of
their obligations to CFC.
Much of such assistance is provided at the option of DaimlerChrysler,
which may terminate any of such optional programs in whole or in part at any
time. If DaimlerChrysler is unable to or elects not to provide such
assistance, the loss experience of CFC in respect of the U.S. Wholesale
Portfolio may be adversely affected. In addition, because a substantial
number of the vehicles sold by the dealers are manufactured or distributed by
DaimlerChrysler, if DaimlerChrysler were temporarily or permanently no longer
in such business, the rate of sales of DaimlerChrysler-manufactured vehicles
would decrease, adversely affecting payment rates and the loss experience of
the U.S. Wholesale Portfolio. See "Payment Terms" for a discussion of an
instalment payment plan made available to dealers. See also "Risk Factors --
Trust's Relationship to DaimlerChrysler and CFC".
Dealer Monitoring
The level of each dealer's wholesale credit line is monitored on a
periodic basis by CFC's local zone offices. Dealers are permitted to exceed
such lines on a temporary basis. For example, a dealer may, immediately prior
to a seasonal sales peak, purchase more vehicles than it is otherwise
permitted to finance under its existing credit lines. As another example,
because of slow inventory turnover, a dealer's credit lines may be reduced
prior to its liquidating a sufficient portion of its vehicle inventory. If at
any time CFC learns that a dealer's balance exceeds its approved credit
lines, CFC will evaluate such dealer's financial position and may temporarily
increase such dealer's credit lines or place such dealer in a disciplinary
category known as "finance hold". See "Creation of Receivables".
Audits of dealer vehicle inventories are conducted on a regular basis
by zone office personnel. The timing of each visit is varied and no advance
notice is given to the audited dealer. Auditors review dealers' financial
records and conduct a physical inventory of the vehicles on the dealers'
premises. Through the audit process, CFC reconciles each dealer's physical
inventory with its records of financed vehicles. Audits are intended to
identify instances where a dealer sold vehicles but did not immediately repay
the related advances. The audit process also aids CFC in determining in such
instance whether a dealer received sale proceeds but diverted such proceeds
to uses other than the repayment of the obligations to CFC.
"Dealer Trouble" Status and CFC's Write-Off Policy
Under certain circumstances, CFC will classify a dealer under "Dealer
Trouble" status. Such circumstances include failure to remit any principal or
interest payment when due, any notifications of liens, levies or attachments
and a general deterioration of its financial condition. Once a dealer is
assigned to Dealer Trouble status, any further extension of credit is
determined by CFC on a case-by-case basis.
CFC attempts to work with dealers to resolve instances of Dealer
Trouble status. If, however, a dealer remains on such status, it can result
in one of the following: (a) an orderly liquidation in which the dealer
voluntarily liquidates its inventory through normal sales to retail
customers, (b) a forced liquidation in which the dealer's inventory is
repossessed and, in the case of DaimlerChrysler-franchised dealers, the
franchise is closed, (c) a voluntary surrender of the dealer's inventory and,
in the case of DaimlerChrysler-franchised dealers, franchise closure, or (d)
a forced sale of the dealership. Generally, CFC works with franchised dealers
to find third parties to purchase a troubled dealership. The proceeds of such
sales are used to repay amounts due to CFC. Once liquidation has commenced,
CFC performs
24
an analysis of its position, writes off any amounts identified at such time
as uncollectible and attempts to liquidate all possible collateral remaining.
During the course of a liquidation, CFC may recognize additional losses or
recoveries.
Additional Information
The Prospectus Supplement for each Series offered hereby will set forth
additional information with respect to the Dealer Floorplan Financing
Business.
Year 2000
The Trust has conducted an evaluation of the actions necessary to
ensure that its business critical computer systems will function without
disruption with respect to the application of dating systems in the Year
2000. As CFC is the Servicer of the receivables sold to the Trust, the
business critical computer systems to the Trust are therefore those of CFC.
CFC has conducted an evaluation of the actions necessary to ensure that its
business critical computer systems will function without disruption with
respect to the Year 2000. As a result of this evaluation, CFC is engaged in
the process of upgrading, replacing and testing certain of its information
and other computer systems. CFC's remedial actions are scheduled to be
completed during the third quarter of 1999 and, based upon information
currently available, CFC does not anticipate that the costs of its remedial
actions will be material to the consolidated results of operations and
financial position and are being expensed as incurred. However, there can be
no assurance that the remedial actions being implemented by CFC will be
completed in time to avoid dating systems problems or that the cost will not
be material. If CFC is unable to complete its remedial actions in the planned
timeframe, contingency plans will be developed to address those business
critical systems that may not be Year 2000 compliant.
In addition, disruptions with respect to the computer systems of
vendors or customers, which are outside the control of CFC, could impair the
ability of CFC to obtain necessary services or to provide services to their
customers. Disruptions of CFC's computer systems, or the computer systems of
CFC's vendors or customers, as well as the cost of avoiding such disruption,
could have a material adverse effect upon the financial condition and results
of operations. CFC has a process in place to assess the Year 2000 readiness
of its business critical vendors and customers. CFC believes that the most
likely worst case scenario is that a small number of vendors will be unable
to supply service for a short time after January 1, 2000. As part of the
assessment process, CFC will develop contingency plans for those business
critical vendors who are either unable or unwilling to develop remediation
plans to become Year 2000 compliant. Although these plans have yet to be
developed, CFC expects that these plans will include selective resourcing of
services to Year 2000 compliant vendors. CFC expects that vendors in this
category will represent an insignificant part of its total service base. It
is expected that these plans will be in place by the third quarter of 1999.
25
THE ACCOUNTS
General
The Receivables arise in the Accounts. The Accounts were selected from
all the wholesale accounts in the U.S. Wholesale Portfolio that are Eligible
Accounts (the "Eligible Portfolio"). In order to be included in the Eligible
Portfolio, each Account must be an account established by CFC, directly or as
successor to CFC Corp. or CCC, in the ordinary course of business and meet
certain other criteria provided in the Pooling and Servicing Agreement. See
"Description of the Certificates -- Representations and Warranties". CFC and
the Seller have represented that each believes that the Accounts will be
representative of the accounts in the Eligible Portfolio and that the
inclusion of the Accounts, as a whole, will not represent an adverse
selection from the Eligible Portfolio.
From time to time, Dealers deposit funds with CFC in cash management
accounts, limited in amount to the amount of the wholesale accounts. Funds
deposited by a Dealer in its cash management account are applied to reduce
the Dealer's outstanding Principal Receivables balance and may, under certain
circumstances, be reborrowed by the Dealer.
Pursuant to the Pooling and Servicing Agreement, the Seller, and
pursuant to the Receivables Purchase Agreement, the RPA Seller has the right
(subject to certain limitations and conditions), and in some circumstances is
obligated, to designate from time to time additional qualifying wholesale
accounts to be included as Accounts and to convey to the Trust certain of the
Receivables of such Additional Accounts, including Receivables thereafter
created. These accounts must meet the eligibility criteria set forth above as
of the date such accounts are designated as Additional Accounts. The RPA
Seller will convey the Receivables then existing, with certain exceptions, or
thereafter created under such Additional Accounts to the Seller, which will
in turn convey them to the Trust. See "Description of the Certificates --
Addition of Accounts". In addition, as of any Additional Cut-off Date in
respect of Additional Accounts and the date any new Receivables are
generated, the RPA Seller will represent and warrant to the Seller, and the
Seller will represent and warrant to the Trust, that the Receivables meet the
eligibility requirements set forth in the Pooling and Servicing Agreement.
See "Description of the Certificates -- Conveyance of Receivables". Under
certain circumstances specified in the Pooling and Servicing Agreement, the
Seller has the right to remove Accounts, and the Receivables arising
therefrom, from the Trust. See "Description of the Certificates -- Removal of
Accounts". Throughout the term of the Trust, the Accounts from which the
Receivables arise will be the same Accounts designated by the Seller on the
Initial CutOff Date plus any Additional Accounts, minus any Accounts removed
from the Trust.
Information with respect to the Accounts will be set forth in each
Prospectus Supplement.
CHRYSLER FINANCIAL COMPANY L.L.C.,
CHRYSLER FINANCIAL CORPORATION AND
CHRYSLER CREDIT CORPORATION
CFC, a wholly-owned subsidiary of DaimlerChrysler, is a financial
services organization. CFC, a Michigan limited liability company, is the
continuing company resulting from a merger on October 25, 1998, of CFC Corp.
into CFC. CFC Corp., a Michigan corporation, was the continuing corporation
resulting from a merger on June 1, 1967, of a financial services subsidiary
of Chrysler Corporation (as predecessor of DaimlerChrysler) into a newly
acquired, previously nonaffiliated finance company incorporated in 1926. CFC
is engaged in automotive retail, wholesale and fleet financing, servicing
commercial leases and loans, property, casualty and other insurance and
automotive dealership facility development and management. CFC's business is
substantially dependent upon the operations of DaimlerChrysler. In
particular, lower levels of production and sale of DaimlerChrysler's
automotive products could result in a reduction in the level of finance and
insurance operations of CFC. See "Risk Factors -- Trust's Relationship to
DaimlerChrysler and CFC". CFC's executive offices are located at 27777
Franklin Road, Southfield, Michigan 48034-8286 and its telephone number is
(248) 948-3060.
26
CCC, a wholly owned subsidiary of CFC Corp., provided retail, wholesale
and lease financing services to automobile dealers and their customers
throughout the United States. On December 31, 1995, CCC merged into CFC Corp.
CFC Corp., in accordance with the terms of the Pooling and Servicing
Agreement and the Receivables Purchase Agreement, assumed all the rights and
obligations of CCC under (a) the Pooling and Servicing (including rights and
obligations as servicer thereunder) and (b) the Receivables Purchase
Agreement (including rights and obligations of the seller thereunder). After
that merger, CFC Corp. provided retail, wholesale and lease financing
services to automobile dealers and their customers throughout the United
States, On October 25, 1998. CFC Corp. merged into CFC. CFC, in accordance
with the terms of the Pooling and Servicing Agreement, assumed all the rights
and obligations of CFC Corp. under (a) the Pooling and Servicing Agreement
(including rights and obligations of servicer thereunder) and (b) the
Receivables Purchase Agreement (including rights and obligations of the
seller thereunder).
The Prospectus Supplement for each Series offered hereby will set forth
certain additional information with respect to CFC.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of a Series will be issued pursuant to a Pooling and
Servicing Agreement (as supplemented and amended from time to time, the
"Pooling and Servicing Agreement"), among USA, as seller of the Receivables,
CFC, as servicer of the Receivables, and the Trustee, substantially in the
form filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The Trustee will make available for inspection a copy
of the Pooling and Servicing Agreement (without exhibits or schedules) to
Certificateholders of a Series offered hereby on written request. The
following summary describes certain terms generally applicable to the
Certificates of each Series, does not purport to be complete and is qualified
in its entirety by reference to the Pooling and Servicing Agreement and the
applicable Series Supplement.
The Certificates of each Series offered hereby will evidence undivided
beneficial interests in certain assets of the Trust allocated to the
Certificateholders' Interest of such Series, representing the right to
receive from such Trust assets funds up to (but not in excess of) the amounts
required to make payments of interest on and principal of the Certificates of
such Series pursuant to the Pooling and Servicing Agreement as described in
the related Prospectus Supplement.
The Certificates of each Series offered hereby will initially be
represented by Certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Seller, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series offered hereby
will be available for purchase in minimum denominations of $1,000 and
integral multiples thereof in book-entry form only. The Seller has been
informed by DTC that DTC's nominee will be Cede. Accordingly, Cede is
expected to be the holder of record of the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein, no Certificateholder will be entitled to receive a physical
certificate representing a Certificate. All references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions from
Participants and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer to distributions, notices,
reports and statements to DTC or Cede, as the registered holder of the
Certificates, as the case may be. See "Book-Entry Registration" and
"Definitive Certificates".
Interest
Interest on the principal balance of the Certificates of a Series or
Class offered hereby will accrue at the per annum rate either specified in or
determined in the manner specified in the related Prospectus Supplement and
will be payable to the Certificateholders of such Series or Class as and on
the Interest
27
Payment Dates specified in the related Prospectus Supplement. If
the Prospectus Supplement for a Series or Class of Certificates so provides,
the interest rate and the Interest Payment Dates applicable to each
Certificate of that Series or Class may be subject to adjustment from time to
time, including as a result of a decline in the interest rate borne by the
Receivables.
Except as otherwise provided herein or in the related Prospectus
Supplement, Interest Collections and certain other amounts allocable to the
Certificateholders' Interest of a Series offered hereby will be used to make
interest payments to Certificateholders of such Series on each Interest
Payment Date with respect thereto, provided that during any Early
Amortization Period with respect to such Series, interest will be distributed
to such Certificateholders monthly on each Special Payment Date.
If the Interest Payment Dates for a Series or Class occur less
frequently than monthly, such collections or other amounts (or the portion
thereof allocable to such Class) will be deposited in one or more trust
accounts (each an "Interest Funding Account") and used to make interest
payments to Certificateholders of such Series or Class on the following
Interest Payment Date with respect thereto. If a Series has more than one
Class of Certificates, each such Class may have a separate Interest Funding
Account.
Principal
The Certificates of each Series and Class will have a Revolving Period
during which Principal Collections and certain other amounts otherwise
allocable to the Certificateholders' Interest of such Series or Class will be
paid to the Seller, deposited to the Excess Funding Account, if any, for such
Series or distributed to, or for the benefit of, the Certificateholders of
other Classes or Series. Unless a Reinvestment Period or an Early
Amortization Period, in each case that is not terminated in accordance with
the provisions of the related Series Supplement, commences with respect to a
Series, following the Revolving Period with respect to such Series or a Class
thereof, such Series or Class will have either an Accumulation Period or a
Controlled Amortization Period.
During the Accumulation Period, if any, with respect to a Series,
Principal Collections and certain other amounts allocable to the
Certificateholders' Interest of such Series (including, if and to the extent
the Series Supplement therefor so provides, Excess Principal Collections, if
any, allocable to such Series) will be deposited on each Distribution Date in
a Principal Funding Account and, together, to the extent provided in the
related Series Supplement, with any amounts in the Excess Funding Account, if
any, for such Series, used to make principal distributions to the
Certificateholders of such Series when due. The amount to be deposited in a
Principal Funding Account for any Series offered hereby on any Distribution
Date may, but will not necessarily, be limited to the Controlled Deposit
Amount specified in the related Prospectus Supplement. If a Series has more
than one Class of Certificates, each Class may have a different Accumulation
Period and a separate Principal Funding Account and Controlled Deposit
Amount. In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to deposits of principal into such
Principal Funding Accounts.
During the Controlled Amortization Period, if any, with respect to a
Series, Principal Collections and certain other amounts allocable to the
Certificateholders' Interest of such Series (including, if and to the extent
the Supplement for such Series so provides, Excess Principal Collections, if
any, allocable to such Series) will be used, together, to the extent provided
in the related Series Supplement, with any amounts in the Excess Funding
Account, if any, for such Series, on each Distribution Date to make principal
distributions to any Class of Certificateholders of such Series then
scheduled to receive such distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on any Distribution Date may,
but will not necessarily, be limited to the Controlled Amortization Amount
for such Series specified in the related Prospectus Supplement. If a Series
has more than one Class of Certificates, each Class may have a different
Controlled Amortization Period and a separate Controlled Amortization Amount.
In addition, the related Prospectus Supplement may describe certain
priorities among such Classes with respect to such distributions.
During the Reinvestment Period, if any, with respect to a Series,
Principal Collections and certain other amounts allocable to the
Certificateholders' Interest of such Series (including, if and to the extent
28
the Series Supplement for such Series so provides, Excess Principal
Collections, if any, allocable to such Series) will be deposited on each
Distribution Date in a Principal Funding Account and, together, to the extent
provided in the related Series Supplement, with any amounts in the Excess
Funding Account, if any, for such Series, used to make principal
distributions to the Certificateholders of such Series when due, in each case
unless the related Series Supplement provides otherwise. The amount to be
deposited in a Principal Funding Account for any Series offered hereby on any
Distribution Date will not be limited to any Controlled Deposit Amount or
Controlled Amortization Amount. If a Series has more than one Class of
Certificates, each Class may have a separate Principal Funding Account and
the related Prospectus Supplement may describe certain priorities among such
Classes with respect to deposits of principal into such Principal Funding
Accounts.
During the Early Amortization Period, if any, with respect to a Series,
Principal Collections and certain other amounts allocable to the
Certificateholders' Interest of such Series (including, if and to the extent
the Series Supplement for such Series so provides, Excess Principal
Collections, if any, allocable to such Series) will be distributed as
principal payments to the applicable Certificateholders monthly on each
Distribution Date beginning with the first Special Payment Date. During the
Early Amortization Period with respect to a Series, distributions of
principal to Certificateholders of such Series will not be limited to any
Controlled Deposit Amount or Controlled Amortization Amount. In addition,
with respect to any Series, to the extent provided in the related Series
Supplement, any funds on deposit in the Excess Funding Account, if any, with
respect to such Series and any funds on deposit in the Principal Funding
Account with respect to such Series will be paid to the Certificateholders of
the relevant Class or Series. See "Reinvestment Events and Early Amortization
Events" for a discussion of the events which might lead to the commencement
of the Early Amortization Period with respect to a Series.
Funds on deposit in any Principal Funding Account established with
respect to a Class or Series offered hereby will be invested in Eligible
Investments, and may be subject to a guarantee or guaranteed investment
contract or other mechanism specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such funds.
In order to enhance the likelihood of the payment in full of the principal
amount of a Series or Class of Certificates offered hereby at the end of an
Accumulation Period with respect thereto, such Series or Class may be subject
to a maturity liquidity facility or other similar mechanism specified in the
relevant Prospectus Supplement. A maturity liquidity facility is a financial
contract that generally provides that sufficient principal will be
available to retire the Certificates at a certain date.
Certificates of a Series or Class offered hereby may also be subject to
purchase from time to time, generally at their respective principal amounts,
in connection with a remarketing thereof if so specified in the related
Prospectus Supplement. A purchase of Certificates of such a Series or Class
may result in a decrease in the outstanding principal amount of such Series
or Class prior to the commencement of any Controlled Amortization Period or
Early Amortization Period with respect thereto. The Prospectus Supplement for
any Series offered hereby subject to purchase as described in this paragraph
will describe the conditions to and procedures for any such purchase. The
proceeds of any such purchase would be paid to the holders of the
Certificates so purchased.
Book-Entry Registration
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold Certificates of a Series offered hereby through
DTC (in the United States) or CEDEL or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. Except as described herein, no Certificateholder will be
entitled to receive a certificate representing such person's interest in the
Certificates. Unless and until Definitive Certificates are issued under the
limited circumstances described below, all references herein to actions
by Certificateholders shall refer to actions
29
taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to
Certificateholders shall refer to distributions, notices, reports and
statements to Cede, as the registered holder of the Certificates, for
distribution to the Certificateholders in accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective depositaries which in turn
will hold such positions in customers' securities accounts in the
depositaries' names on the books of DTC. Citibank, N.A. ("Citibank") will act
as depositary for CEDEL and Morgan Guaranty Trust Company of New York
("Morgan") will act as depositary for Euroclear (in such capacities, the
"Foreign Agency Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their
applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing
system by its Foreign Agency Depositary; however, such cross-market
transactions will require delivery of instructions to the relevant European
international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to
its Foreign Agency Depositary to take action to effect final settlement on
its behalf by delivering or receiving securities in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. CEDEL Participants and Euroclear Participants
may not deliver instructions directly to the Foreign Agency Depositaries.
Because of time-zone difference, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or CEDEL participant on such business day.
Cash received in CEDEL or Euroclear as a result of sales of securities by or
through a CEDEL Participant or a Euroclear Participant to a DTC participant
will be received with value on the DTC settlement date but will be available
in the relevant CEDEL or Euroclear cash account only as of the business day
following settlement in DTC. For additional information regarding clearance
and settlement procedures for the Certificates, see Annex I hereto and for
information with respect to tax documentation procedures relating to the
Certificates, see Annex I hereto and "Tax Matters -- Certain Federal Income
Tax Consequences -- Foreign Investors".
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was
created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
their accounts, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Certificateholders that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or other
interests in, Certificates may do so only through Participants and Indirect
Participants. In addition, Certificateholders will receive all distributions
of principal of and interest on the Certificates from the Trustee through DTC
and its Participants. Under a book-entry format, Certificateholders will
receive payments after the related Distribution Date because, while
30
payments are required to be forwarded to Cede, as nominee for DTC, on each
such date, DTC will forward such payments to its Participants which
thereafter will be required to forward them to Indirect Participants or
Certificateholders. It is anticipated that the only "Certificateholder" (as
such term is used in the Pooling and Servicing Agreement) will be Cede, as
nominee of DTC, and that Certificateholders will not be recognized by the
Trustee as Certificateholders under the Pooling and Servicing Agreement.
Certificateholders will only be permitted to exercise the rights of
Certificateholders under the Pooling and Servicing Agreement indirectly
through DTC and its Participants who in turn will exercise their rights
through DTC.
Under the rules, regulations and procedures creating and affecting DTC
and its operations, DTC is required to make book-entry transfers among
Participants on whose behalf it acts with respect to the Certificates and is
required to receive and transmit distributions of principal of and interest
on the Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly
are required to make book-entry transfers and receive and transmit such
payments on behalf of their respective Certificateholders.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for
such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Certificateholder under the Pooling and Servicing Agreement only
at the direction of one or more Participants to whose account with DTC the
Certificates are credited.
Cedelbank, societe anonyme ("CEDEL"), 67 Bd Grande-Duchesse
Charlotte, L-1420, Luxembourg (R.C. Luxembourg B9248) was incorporated in
1970 as a limited company under Luxembourg law. CEDEL is owned by banks,
securities dealers, and financial institutions and currently has over 100
shareholders, including U.S. financial institutions or their subsidiaries. No
single entity may own more than five percent of CEDEL's stock.
CEDEL is registered as a "De positaire professional de titre" in
Luxembourg, and as such is subject to regulation by the Luxembourg Monetary
Authority ("IML"), which also supervises Luxembourg's banks.
CEDEL provides clearance and settlement services for its customers and
currently accepts over 40,000 securities issues for clearance, settlement,
and custody. CEDEL's customers consist of brokerdealers, financial
institutions, and other securities professionals involved in the movement
and/or custody of securities. CEDEL's U.S. customers are limited to brokers,
dealers, and banks. Currently, CEDEL has approximately 3,000 customers
located in over 60 countries, including all major European countries, Canada,
and the United States.
The Euroclear System was created in 1968 to hold securities for
participants of the Euroclear System ("Euroclear Participants") and to clear
and settle transactions between Euroclear Participants through simultaneous
electronic book-entry delivery against payment, thereby eliminating the need
for physical movement of certificates and any risk from lack of simultaneous
transfers of securities and cash. Transactions may now be settled in any of
27 currencies, including United States dollars. The Euroclear System includes
various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to
the arrangements for cross-market transfers with DTC described above. The
Euroclear System is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office (the "Euroclear Operator" or "Euroclear"),
under contract with Euroclear S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and
all Euroclear securities clearance accounts and Euroclear Clearance System
cash accounts are accounts with the Euroclear Operator, not the Cooperative.
The Cooperative establishes policy for the Euroclear System on behalf of
Euroclear Participants. Euroclear Participants include banks (including
central banks), securities brokers and dealers and other professional
financial
31
intermediaries and may include any underwriters, agents or dealers
involved in the distribution of the Certificates. Indirect access to the
Euroclear System is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve
System and the New York State Banking Department, as well as the Belgian
Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear
and the related Operative Procedures of the Euroclear System, and applicable
Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear
System, withdrawals of securities and cash from the Euroclear System, and
receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance
accounts. The Euroclear Operator acts under the Terms and Conditions only on
behalf of Euroclear Participants, and has no record of or relationship with
persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Foreign Agency Depositary. Such
distributions will be subject to tax reporting in accordance with relevant
United States tax laws and regulations. See "Certain Tax Matters". CEDEL or
the Euroclear Operator, as the case may be, will take any other action
permitted to be taken by a Certificateholder under the Pooling and Servicing
Agreement or the applicable Series Supplement on behalf of a CEDEL
Participant or Euroclear Participant only in accordance with its relevant
rules and procedures and subject to its Foreign Agency Depositary's ability
to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series or Class offered hereby will be issued in fully
registered, certificated form to Certificateholders or their nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i)
the Seller advises the Trustee in writing that DTC is no longer willing or
able to properly discharge its responsibilities as Depository with respect to
the Certificates of such Series or Class and the Seller is unable to locate a
qualified successor, (ii) the Seller, at its option, elects to terminate the
book-entry system through DTC with respect to such Series or Class or (iii)
after the occurrence of a Service Default, Certificateholders representing
not less than 50% of the aggregate unpaid principal amount of the
Certificates of such Series or Class advise the Trustee and DTC through
Participants in writing that the continuation of a book-entry system through
DTC (or a successor thereto) is no longer in the best interests of such
Certificateholders.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for such Certificates.
Upon surrender by DTC of the certificate or certificates representing such
Certificates and instructions for re-registration, the Trustee will issue
such Certificates in the form of Definitive Certificates, and thereafter the
Trustee will recognize the holders of such Definitive Certificates as
Certificateholders under the Pooling and Servicing Agreement ("Holders"). In
the event that Definitive Certificates are issued or DTC ceases to be the
clearing agency for any Series or Class of Certificates, the Pooling and
Servicing Agreement provides that the applicable Certificateholders will be
notified of such event.
32
Distributions of principal of and interest on the Certificates will be
made by the Trustee directly to Holders in accordance with the procedures set
forth herein and in the Pooling and Servicing Agreement. Distributions on
each Distribution Date will be made to Holders in whose names the Definitive
Certificates were registered at the close of business on the related record
date. Distributions will be made by check mailed to the address of such
Holder as it appears on the register maintained by the Trustee. The final
distribution on any Certificate (whether Definitive Certificates or the
certificate or certificates registered in the name of Cede representing the
Certificates), however, will be made only upon presentation and surrender of
such Certificate on the final payment date at such office or agency as is
specified in the notice of final distribution to Certificateholders. The
Trustee will provide such notice to registered Certificateholders not later
than the fifth day of the month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee, which shall initially be 101 Barclay Street, New
York, New York 10286. No service charge will be imposed for any registration
of transfer or exchange, but the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in
connection therewith.
The Seller's Certificate
The Pooling and Servicing Agreement provides that the Seller may
exchange a portion of the certificate evidencing the Seller's Interest (the
"Seller's Certificate") for another certificate (a "Supplemental
Certificate") for transfer or assignment to a person designated by the Seller
upon the execution and delivery of a supplement to the Pooling and Servicing
Agreement (which supplement shall be subject to the amendment section of the
Pooling and Servicing Agreement to the extent that it amends any of the terms
of the Pooling and Servicing Agreement); provided that (a) the Seller shall
at the time of such exchange and after giving effect thereto have an interest
in the Pool Balance of not less than 2% of the aggregate amount of the
principal balances of the Receivables (the "Pool Balance"), (b) the Seller
shall have delivered to the Trustee, the Rating Agencies and any Enhancement
Provider a Tax Opinion with respect to such exchange and (c) the Seller shall
have delivered to the Trustee written confirmation from the applicable Rating
Agencies that such exchange will not result in a reduction or withdrawal of
the rating of any outstanding Series or Class of Certificates. Any subsequent
transfer or assignment of a Supplemental Certificate is also subject to the
conditions described in clauses (b) and (c) in the preceding sentence.
New Issuances
The Pooling and Servicing Agreement provides that pursuant to any one
or more Supplements, the Trustee may issue two types of certificates: (i) one
or more Series of Certificates which are transferable and have the
characteristics described below and (ii) the Seller's Certificate (and any
Supplemental Certificate) which will evidence the Seller's Interest and will
be transferable only upon the satisfaction of certain conditions described
under "The Seller's Certificate". The Pooling and Servicing Agreement also
provides that, pursuant to one or more Supplements, the Seller may cause the
Trustee to issue one or more new Series. Under the Pooling and Servicing
Agreement, the Seller may specify, among other things, with respect to any
Series: (a) its name or designation, (b) its initial principal amount (or
method for calculating such amount), (c) its certificate rate (or the method
for determining its certificate rate), (d) a date on which it will begin its
Accumulation Period or Controlled Amortization Period, if any, (e) the method
for allocating principal and interest to Certificateholders of such Series,
(f) the percentage used to calculate monthly servicing fees, (g) the issuer
and terms of any Enhancement with respect thereto or the level of
subordination provided by the Seller's Interest, (h) the terms on which the
Certificates of such Series may be exchanged for Certificates of another
Series, be subject to repurchase, optional redemption or mandatory redemption
by the Seller or be remarketed by any remarketing agent, (i) the Series
Termination Date and (j) any other terms permitted by the Pooling and
Servicing Agreement (all such terms, the "Principal Terms" of such Series).
The Seller may offer any Series to the public under a prospectus or other
disclosure document (a "Disclosure Document") in transactions either
registered under the Securities Act or exempt from registration thereunder,
directly or through one or more underwriters or placement agents. There is no
limit to the number of Series that may be issued under the Pooling and
Servicing Agreement.
33
The Pooling and Servicing Agreement provides that the Seller may
specify Principal Terms of a new Series such that each Series has a
Controlled Amortization Period or Accumulation Period which may have a
different length and begin on a different date than the Controlled
Amortization Period or Accumulation Period for any other Series. Further, one
or more Series may be in their Reinvestment Periods, Early Amortization
Periods, Controlled Amortization Periods or Accumulation Periods while
other Series are not. Thus, certain Series may be amortizing or accumulating
principal, while other Series are not. Moreover, different Series may have
the benefits of different forms of Enhancement issued by different entities.
Under the Pooling and Servicing Agreement, the Trustee will hold each form of
Enhancement only on behalf of the Series (or a particular Class within a
Series) with respect to which it relates, unless otherwise provided in the
related Series Supplement or Series Supplements. The Pooling and Servicing
Agreement also provides that the Seller may specify different certificate
rates and Monthly Servicing Fees with respect to each Series (or a particular
Class within a Series). In addition, the Seller has the option under the
Pooling and Servicing Agreement to vary among Series (or Classes within a
Series) the terms upon which a Series (or Classes within a Series) may be
repurchased by the Seller.
Under the Pooling and Servicing Agreement and pursuant to a Series
Supplement, a new Series may be issued only upon the satisfaction of certain
specified conditions. The Seller may cause the issuance of a new Series by
notifying the Trustee at least five business days in advance of the
applicable Series Issuance Date. The notice shall state the designation of
any Series (and Classes within a Series, if any). The Pooling and Servicing
Agreement provides that the Trustee will issue any such Series only upon
delivery to it of the following: (i) a Series Supplement in form satisfactory
to the Trustee signed by the Seller and the Servicer and specifying the
Principal Terms of such Series, (ii) the form of any Enhancement and any
related agreement, (iii) an opinion of counsel to the effect that, for
federal income and Michigan income and single business tax purposes, (x) such
issuance will not adversely affect the characterization of the Certificates
of any outstanding Series or Class as debt of the Seller, (y) such issuance
will not cause a taxable event to any Certificateholders (an opinion of
counsel to the effect referred to in clauses (x) and (y) with respect to any
action is referred to herein as a "Tax Opinion") and (z) such new Series will
be characterized as debt of the Seller, and (iv) written confirmation from
the applicable Rating Agencies that such issuance will not result in a
reduction or withdrawal of the rating of any outstanding Series or Class of
Certificates. Such issuance is also subject to the conditions that (a) the
Seller shall have represented and warranted that such issuance shall not, in
the reasonable belief of the Seller, cause an Early Amortization Event or
Reinvestment Event to occur with respect to any outstanding Series and (b)
after giving effect to such issuance, the Seller's interest in the Pool
Balance shall not be less than 2% of the Pool Balance. Upon satisfaction of
all such conditions, the Trustee will issue such Series.
Conveyance of Receivables and Collateral Security
On the date on which the Certificates related to the Series 1991-1 were
originally issued (the "Initial Closing Date"), CARCO sold and assigned to
the Trust all of its right, title and interest in and to the Receivables and
the related Collateral Security as of the Initial Cut-Off Date, all
Receivables thereafter created in the Accounts and its interests in the
related Collateral Security and the Receivables Purchase Agreement, and the
proceeds of all of the foregoing. On August 8, 1991, CARCO, in accordance
with the terms of the Pooling and Servicing Agreement and the Receivables
Purchase Agreement, transferred the Seller's Interest and all its rights and
obligations under the Pooling and Servicing Agreement and the Receivables
Purchase Agreement to USA. See "U.S. Auto Receivables Company and the Trust".
In addition, the Seller has previously designated Additional Accounts to be
added to the Accounts and has previously conveyed to the Trust the
Receivables in such Additional Accounts (together with the related Collateral
Security) as of the applicable Additional Cut-Off Date and all Receivables
(and related Collateral Security) created thereafter.
In connection with the sale of the Receivables to the Seller by the RPA
Seller and the transfer of the Receivables to the Trust, USA and CFC are
required to indicate in their computer records that the Receivables in the
Accounts and the related Collateral Security have been conveyed to the Trust.
In
34
addition, the Seller is required to provide to the Trustee a computer file
or microfiche or written list containing a true and complete list showing for
each Account, as of the Initial Cut-Off Date and the applicable Additional
Cut-Off Date, (i) its account number, (ii) the outstanding balance of the
Receivables in such Account and (iii) the outstanding balance of Principal
Receivables in such Account. CFC will retain and will not deliver to the
Trustee any other records or agreements relating to the Receivables. Except
as set forth above, the records and agreements relating to the Receivables
have not and will not be segregated from those relating to other accounts of
CFC, and the physical documentation relating to the Receivables has not and
will not be stamped or marked to reflect the transfer of the Receivables to
the Trust. The Seller will file one or more financing statements in
accordance with applicable state law to perfect the Trust's interest in the
Receivables, the Collateral Security, the Receivables Purchase Agreement and
the proceeds thereof. See "Risk Factors" and "Certain Legal Aspects of the
Receivables".
As contemplated above and as described below under "Addition of
Accounts", the Seller has the right (subject to certain limitations and
conditions), and in some circumstances is obligated, to designate from time
to time additional accounts to be included as Additional Accounts, to
purchase from the RPA Seller the Receivables then existing or thereafter
created in such Additional Accounts and to convey such Receivables to the
Trust. Each such Additional Account must be an Eligible Account. In respect
of any conveyance of Receivables in Additional Accounts, the Seller will
follow the procedures set forth in the preceding paragraph, except the list
will show information for such Additional Accounts as of the date such
Additional Accounts are identified and selected (the "Additional Cut-Off
Date").
Representations and Warranties
The Seller will make representations and warranties to the Trust
relating to the Accounts, the Receivables and the Collateral Security to the
effect, among other things, that (a) as of each Series Cut-Off Date, and the
date of issuance of any Series (a "Series Issuance Date") (or, in the case of
the Additional Accounts, as of the Additional Cut-Off Date and the date the
related Receivables are transferred to the Trust (an "Addition Date")), each
Account or Additional Account was an Eligible Account, (b) as of the Series
CutOff Date (or as of the Additional Cut-Off Date, in the case of any
Additional Accounts) or as of the date any future Receivable is generated (a
"Transfer Date"), each Receivable is an Eligible Receivable or, if such
Receivable is not an Eligible Receivable, such Receivable is conveyed to the
Trust as described below under "Ineligible Receivables, the Instalment
Balance Amount and the Overconcentration Amount", (c) each Receivable and all
Collateral Security conveyed to the Trust on the Transfer Date or, in the
case of Additional Accounts, on the Addition Date, and all of the Seller's
right, title and interest in the Receivables Purchase Agreement, have been
conveyed to the Trust free and clear of any liens and (d) all appropriate
consents and governmental authorizations required to be obtained by the
Seller in connection with the conveyance of each such Receivable or
Collateral Security have been duly obtained. If the Seller breaches any
representation and warranty described in this paragraph and such breach
remains uncured for 30 days or such longer period as may be agreed to by the
Trustee, after the earlier to occur of the discovery of such breach by the
Seller or the Servicer or receipt of written notice of such breach by the
Seller or the Servicer, and such breach has a materially adverse effect on
the Certificateholders' Interest in any Receivable or Account, the
Certificateholders' Interest in such Receivable or, in the case of a breach
relating to an Account, all Receivables in the related Account ("Ineligible
Receivables") will be reassigned to the Seller on the terms and conditions
set forth below and such Account shall no longer be included as an Account.
Each such Receivable shall be reassigned to the Seller on or before the
end of the Collection Period in which such reassignment obligation arises by
the Seller directing the Servicer to deduct the principal balance of such
Receivable from the Pool Balance. In the event that such deduction would
cause the Seller's Participation Amount, which is an amount equal to the Pool
Balance minus the aggregate Invested Amounts for all outstanding Series, to
be less than the aggregate Available Subordinated Amounts for all Outstanding
Series (the "Trust Available Subordinated Amount") on the preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on such Distribution Date), on the date
on which such reassignment is to occur the Seller will be
35
obligated to make a deposit into the Collection Account in immediately
available funds in an amount equal to the amount by which the Seller's
Participation Amount would be less than the Trust Available Subordinated
Amount (the amount of any such deposit being referred to herein as a
"Transfer Deposit Amount"), provided that if the Transfer Deposit Amount is
not so deposited, the principal balance of the related Receivables will be
deducted from the Pool Balance only to the extent the Seller's Participation
Amount is not reduced below the Trust Available Subordinated Amount and any
principal balance not so deducted will not be reassigned and will remain part
of the Trust. The reassignment of any such Receivable to the Seller and the
payment of any related Transfer Deposit Amount will be the sole remedy
respecting any breach of the representations and warranties described in the
preceding paragraph with respect to such Receivable available to
Certificateholders or the Trustee on behalf of Certificateholders.
The Seller will also make representations and warranties to the Trust
to the effect, among other things, that as of each Series Issuance Date (a)
it is duly incorporated and in good standing, it has the authority to
consummate the transactions contemplated by the Pooling and Servicing
Agreement and the Pooling and Servicing Agreement constitutes a valid,
binding and enforceable agreement of the Seller and (b) the Pooling and
Servicing Agreement constitutes a valid sale, transfer and assignment to the
Trust of all right, title and interest of the Seller in the Receivables and
the Collateral Security, whether then existing or thereafter created, the
Receivables Purchase Agreement, and the proceeds thereof (including proceeds
in any of the accounts established for the benefit of the
Certificateholders of any Series), subject to the rights of the Purchasers
with respect to certain of the Collateral Security, under the UCC as then in
effect in the State of Michigan, which is effective as to each Receivable
existing on the Initial Closing Date (or as of the Addition Date, if
applicable) or, as to each Receivable arising thereafter, upon the creation
thereof and until termination of the Trust. In the event that the breach of
any of the representations and warranties described in this paragraph has a
materially adverse effect on the Certificateholders' Interest in the
Receivables, either the Trustee or the holders of Certificates of all
outstanding Series evidencing not less than a majority of the aggregate
unpaid principal amount of all outstanding Series, by written notice to the
Seller and the Servicer (and to the Trustee and the issuer or provider of any
Enhancement (an "Enhancement Provider") if given by Certificateholders), may
direct the Seller to accept the reassignment of the Certificateholders'
Interest of all Series within 60 days of such notice, or within such longer
period specified in such notice. The Seller will be obligated to accept the
reassignment of the Certificateholders' Interest on a Distribution Date
occurring within such 60-day period. Such reassignment will not be required
to be made, however, if at the end of such applicable period, the
representations and warranties shall then be true and correct in all material
respects and any materially adverse effect caused by such breach shall have
been cured. The price for such reassignment will generally be equal to the
aggregate "Invested Amounts" (as specified in the related Series Supplements)
of all Series on the Determination Date preceding the Distribution Date on
which the purchase is scheduled to be made plus accrued and unpaid interest
on the unpaid principal amount of the Certificates at the applicable
certificate rate (together with interest on overdue interest) plus, with
respect to any particular Series, any other amounts specified in the Series
Supplement therefor. The payment of the reassignment price for all
outstanding Series, in immediately available funds, will be considered a
payment in full of the Certificateholders' Interest. Such funds will be
distributed to the Certificateholders entitled thereto upon presentation and
surrender of the Certificates. If the Trustee or the Certificateholders give
a notice as provided above, the obligation of the Seller to make any such
deposit will constitute the sole remedy respecting a breach of the
representations and warranties available to Certificateholders or the Trustee
on behalf of the Certificateholders.
As of the effective date of the CARCO Transfer, USA was deemed to have
made all the representations and warranties of the Seller (including the
Seller's representations and warranties set forth above) in the Pooling and
Servicing Agreement and in any Series Supplement with respect to any Series
or Class of Certificates.
Eligible Accounts and Eligible Receivables
An "Eligible Account" is defined to mean each wholesale financing line
of credit extended by CFC, directly or as successor to CFC Corp. or CCC, to a
Dealer, which line of credit, as of the date of determination thereof: (a) is
established by CFC, directly or as successor to CFC Corp. or CCC, in the
36
ordinary course of business pursuant to a floorplan financing agreement, (b)
is in favor of an Eligible Dealer, (c) is in existence and maintained and
serviced by CFC, directly or as successor to CFC Corp. or CCC, and (d) in
respect of which no amounts have been charged off as uncollectible or are
classified as past due or delinquent. An "Eligible Dealer" is a Dealer: (a)
which is located in the United States of America (including its territories
and possessions), (b) which has not been identified by the Servicer as being
the subject of any voluntary or involuntary bankruptcy proceeding or in
voluntary or involuntary liquidation, (c) in which DaimlerChrysler or any
affiliate thereof does not have an equity investment and (d) which has not
been classified by the Servicer as being under Dealer Trouble status.
An "Eligible Receivable" is defined to mean each Receivable: (a) which
was originated or acquired by CFC, directly or as successor to CFC Corp. or
CCC, in the ordinary course of business, (b) which has arisen under an
Eligible Account and is payable in United States dollars, (c) which is owned
by CFC, CFC Corp. or CCC at the time of sale to the Seller, (d) which
represents the obligation of a Dealer to repay an advance made to such Dealer
to finance the acquisition of Vehicles, (e) which at the time of creation and
at the time of transfer to the Trust is secured by a perfected first priority
security interest in the Vehicle relating thereto, (f) which was created in
compliance in all respects with all requirements of law applicable thereto
and pursuant to a floorplan financing agreement which complies in all
respects with all requirements of law applicable to any party thereto, (g)
with respect to which all consents and governmental authorizations required
to be obtained by DaimlerChrysler, CCC, CFC Corp., CFC or the Seller in
connection with the creation of such Receivable or the transfer thereof to
the Trust or the performance by CCC, CFC Corp. or CFC of the floorplan
financing agreement pursuant to which such Receivable was created, have been
duly obtained, (h) as to which at all times following the transfer of such
Receivable to the Trust, the Trust will have good and marketable title
thereto free and clear of all liens arising prior to the transfer or
arising at any time, other than liens permitted pursuant to the Pooling and
Servicing Agreement, (i) which has been the subject of a valid transfer and
assignment from the Seller to the Trust of all the Seller's interest therein
(including any proceeds thereof), (j) which will at all times be the legal
and assignable payment obligation of the Dealer relating thereto, enforceable
against such Dealer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy or other similar laws,
(k) which at the time of transfer to the Trust is not subject to any right of
rescission, setoff, or any other defense (including defenses arising out of
violations of usury laws) of the Dealer, (1) as to which, at the time of
transfer of such Receivable to the Trust, DaimlerChrysler, CCC, CFC Corp.,
CFC and the Seller have satisfied all their respective obligations with
respect to such Receivable required to be satisfied at such time, (m) as to
which, at the time of transfer of such Receivable to the Trust, neither
DaimlerChrysler, CCC, CFC Corp. or CFC nor the Seller has taken or failed to
take any action which would impair the rights of the Trust or the
Certificateholders therein, (n) which constitutes "chattel paper" as defined
in Article 9 of the UCC as then in effect in the State of Michigan and (o)
which was transferred to the Trust with all applicable governmental
authorization.
The Trustee did not and it is not required or anticipated that the
Trustee will make any initial or periodic general examination of the
Receivables or any records relating to the Receivables for the purpose of
establishing the presence or absence of defects, compliance with
representations and warranties of the Seller or for any other purpose. In
addition, it is not anticipated or required that the Trustee will make any
initial or periodic general examination of the Servicer for the purpose of
establishing the compliance by the Servicer with its representations or
warranties, the observation of its obligations under the Pooling and
Servicing Agreement or for any other purpose. The Servicer, however, will
deliver to the Trustee on or before March 31 of each calendar year, an
opinion of counsel with respect to the validity of the interest of the Trust
in and to the Receivables and certain other components of the Trust.
Ineligible Receivables, the Installment Balance Amount and the
Overconcentration Amount
For the purpose of facilitating the administration and reporting
requirements of the Servicer under the Pooling and Servicing Agreement, all
Ineligible Receivables arising in an Eligible Account shall be transferred to
the Trust, provided that, if the Series Supplement for a Series so provides,
the Incremental Subordinated Amount for such Series will be adjusted by the
portion of the aggregate principal amount
37
of Receivables included therein allocable to the Certificateholders' Interest
of such Series. In addition, if the Series Supplement for a Series so
provides, the Incremental Subordinated Amount for such Series shall be
adjusted to reflect, on each Distribution Date, the aggregate principal
amount of Receivables in the Trust on such Distribution Date which are Dealer
Overconcentrations (the "Overconcentration Amount") allocable to the
Certificateholders' Interest of such Series and the portion of the aggregate
amount of Installment Balances in respect of which CFC has not received an
offsetting payment from the related Dealer on such Distribution Date (the
"Installment Balance Amount") allocable to the Certificateholders' Interest
of such Series. As used herein, "Dealer Overconcentrations" on any
Distribution Date means, with respect to any Dealer or group of affiliated
Dealers, the excess of (x) the aggregate principal amount of Receivables due
from such Dealer or group of affiliated Dealers on the last day of the
Collection Period immediately preceding such Distribution Date over (y) 2% of
the Pool Balance on the last day of such immediately preceding Collection
Period.
Addition of Accounts
Subject to the conditions described below, the Seller has the right to
designate from time to time additional accounts to be included as Accounts
(the "Additional Accounts"). In addition, the Seller is required to add the
Receivables of Additional Accounts if the Pool Balance on the last day of any
Collection Period is less than the Required Participation Amount as of the
following Distribution Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on such Distribution
Date). In that case, unless certain insolvency events have occurred with
respect to the Seller, CFC or DaimlerChrysler, CFC under the Receivables
Purchase Agreement will be required to sell to the Seller, and the Seller
under the Pooling and Servicing Agreement will be required to transfer and
assign to the Trust, within 10 business days after the end of such Collection
Period, interests in all Receivables arising in such Additional Accounts,
whether such Receivables are then existing or thereafter created. Any
designation of Additional Accounts is subject to the following conditions,
among others: (i) each such Additional Account must be an Eligible Account;
(ii) the Seller shall represent and warrant that the addition of such
Additional Accounts shall not, in the reasonable belief of the Seller, cause
an Early Amortization Event or Reinvestment Event to occur with
respect to any Series; (iii) the Seller shall not select such Additional
Accounts in a manner that it believes is adverse to the interests of the
Certificateholders or any Enhancement Provider; (iv) the Seller shall deliver
a Tax Opinion, other than in the case of a required addition, and certain
other opinions of counsel with respect to the addition of such Additional
Accounts to the Trustee, the Rating Agencies and any Enhancement Provider;
and (v) the applicable Rating Agencies shall have provided written
confirmation that such addition will not result in a reduction or withdrawal
of the rating of any outstanding Series or Class of Certificates.
Notwithstanding the foregoing, from and after the date on which no
Series issued prior to October 20, 1994 is outstanding the Seller may from
time to time, at its discretion, and subject only to the limitations
specified in this paragraph, designate Additional Accounts. (Additional
Accounts designated in accordance with the provisions described in this
paragraph are referred to herein as "Automatic Additional Accounts".) Unless
each Rating Agency otherwise consents, the number of Automatic Additional
Accounts designated with respect to any of the three consecutive Collection
Periods beginning in January, April, July and October of each calendar year
shall not exceed 8% of the number of Accounts as of the first day of the
calendar year during which such Collection Periods commence and the number of
Automatic Additional Accounts designated during any such calendar year shall
not exceed 20% of the number of Accounts as of the first day of such calendar
year. On or before the first business day of each Collection Period beginning
in January, April, July and October of each calendar year, the Seller shall
have requested and obtained notification from each Rating Agency of any
limitations to the right of the Seller to designate Eligible Accounts as
Automatic Additional Accounts during any period which includes such
Collection Period. On or before January 31, April 30, July 31, October 31 of
each calendar year, the Trustee shall have received confirmation from each
Rating Agency that the addition of all Automatic Additional Accounts included
as Accounts during the three consecutive Collection Periods ending in the
calendar month prior to such date shall not have resulted in any applicable
Rating Agency reducing or withdrawing its rating of any outstanding Series or
Class of Certificates. On or before January 31 and July 31 of each calendar
year (or on or before the last day
38
of each month in certain circumstances), the Seller shall have delivered to
the Trustee, each Rating Agency and any Enhancement Provider an opinion of
counsel with respect to the Automatic Additional Accounts included as
Accounts during the preceding calendar year confirming the validity and
perfection of each transfer of such Automatic Additional Accounts. If such
Rating Agency confirmation or opinion of counsel with respect to any
Automatic Additional Accounts is not so received, such Automatic Additional
Accounts will be removed from the Trust.
Each Additional Account (including each Automatic Additional Account)
must be an Eligible Account at the time of its addition. However, since
Additional Accounts may not have been a part of the initial portfolio of CCC,
CFC Corp. or CFC, they may not be of the same credit quality as the initial
Accounts. Additional Accounts may have been originated by CCC, CFC Corp. or
CFC at a later date using credit criteria different from those which were
applied to the initial Accounts or may have been acquired by CCC, CFC Corp.
or CFC from another wholesale lender that had different credit criteria. In
addition, the Seller will be permitted to designate as Additional Accounts
accounts which contain receivables that have been sold or pledged to third
parties; however, following the applicable Additional Cut-Off Date, no
Receivables thereafter arising in any such accounts shall be sold or pledged
to any third parties.
"Required Participation Amount" for any date means an amount
equal to (a) the sum of the amounts for each Series (other than any
Series or portion thereof which is designated in the relevant Series
Supplement as being an Excluded Series until the Invested Amount of the
Series relating to such Excluded Series is reduced to $0) obtained by
multiplying the Required Participation Percentage for such Series by
the Initial Invested Amount for such Series at such time, plus (b) the
Trust Available Subordinated Amount on the immediately preceding
Determination Date (after giving effect to the allocations,
distributions, withdrawals and deposits to be made on the Distribution
Date following such Determination Date).
"Required Participation Percentage" shall mean, with respect to a
particular Series, the percentage provided in the related Series
Supplement.
Removal of Accounts
The Seller shall have the right at any time to require the removal from
the Trust of Eligible Accounts. To remove any Eligible Account, the Seller
(or the Servicer on its behalf) shall, among other things, (a) furnish to the
Trustee, any Enhancement Provider and the Rating Agencies a written notice
(the "Removal Notice") specifying the Determination Date on which removal of
one or more Accounts will commence (a "Removal Commencement Date") and the
Accounts to be removed from the Trust (the "Designated Accounts"), (b)
determine on the Removal Commencement Date the aggregate principal balance of
Receivables in respect of each such Designated Account (the "Designated
Balance"), (c) from and after such Removal Commencement Date, cease to
transfer to the Trust all Receivables arising in the Designated Accounts, (d)
from and after such Removal Commencement Date, allocate all Principal
Collections in respect of each Designated Account, first to the oldest
outstanding principal balance of such Designated Account, until the
Determination Date on which the Designated Balance in such Designated Account
is reduced to zero (the "Removal Date"), (e) on each business day from and
after such Removal Commencement Date to and until the related Removal Date,
allocate (i) to the Trust (to be further allocated pursuant to the Pooling
and Servicing Agreement), Interest Collections in respect of each Designated
Account with respect to Receivables in all Designated Accounts sold to the
Trust and (ii) to the Seller the remainder of the Interest Collections in all
such Designated Accounts, (f) represent and warrant that the removal of any
such Eligible Account on any Removal Date shall not, in the reasonable belief
of the Seller, cause an Early Amortization Event or Reinvestment Event to
occur with respect to any Series or cause the Pool Balance to be less than
the Required Participation Amount, (g) represent and warrant that no
selection procedures believed by the Seller to be adverse to the interests of
the Certificateholders were utilized in selecting the Designated Accounts,
(h) represent and warrant that such removal will not result in a reduction or
withdrawal of the rating of any outstanding Series or Class of Certificates
and (i) on or before the related Removal Date, deliver to the Trustee and any
Enhancement Provider an officers' certificate confirming the items set
39
forth in clauses (f), (g) and (h) above and a Tax Opinion with respect to
such removal. No Designated Accounts shall be removed if such removal will
result in a reduction or withdrawal of the rating of any outstanding Series
or Class of Certificates.
On any date on which an Account becomes an Ineligible Account (which
date will be deemed the Removal Commencement Date for such Account), the
Seller will commence the removal of such Account from the Trust by taking
each of the actions specified in clauses (a) through (e) of the preceding
paragraph with respect to such Ineligible Account.
Upon satisfaction of the above conditions, on the Removal Date with
respect to any such Designated Account, the Seller will cease such allocation
of collections of Receivables therefrom and such Designated Account shall be
deemed removed from the Trust for all purposes (a "Removed Account").
In addition to the removal rights described above, the Seller shall
have the right at any time to remove Accounts from the Trust and, in
connection therewith, repurchase the then existing Receivables in such
Accounts. To remove Accounts and repurchase the then existing Receivables in
such Accounts, the Seller (or the Servicer on its behalf) shall, among other
things: (a) furnish to the Trust, each Enhancement Provider and the Rating
Agencies a Removal Notice specifying the Designated Accounts which are to be
removed, and the then existing Receivables in such Designated Accounts (the
"Designated Receivables") which are to be repurchased from the Trust and the
Determination Date on which the removal of such Designated Accounts and the
purchase of such Designated Receivables will occur (a "Removal and Repurchase
Date"), (b) deliver to the Trustee on the Removal and Repurchase Date a
computer file or microfiche or written list containing a true and complete
list of the Removed Accounts specifying for each such Account its account
number and the aggregate amount of Receivables outstanding in such Account,
(c) if any Series issued prior to October 20, 1994 is then outstanding,
deposit into the Collection Account on the Removal and Repurchase Date funds
in an amount equal to the aggregate outstanding balance of the Designated
Receivables on such date (the "Repurchased Receivables Purchase Price"), (d)
represent and warrant that the removal of any such Eligible Account and the
repurchase of the Receivables then existing in such Account on any Removal
and Repurchase Date shall not, in the reasonable belief of the Seller, cause
an Early Amortization Event or Reinvestment Event to occur with respect to
any Series or cause the Pool Balance to be less than the Required
Participation Amount, (e) represent and warrant that no selection procedures
believed by the Seller to be adverse to the interests of the
Certificateholders were utilized in selecting the Designated Accounts, (f)
represent and warrant as of the Removal and Repurchase Date that the list of
Removed Accounts delivered pursuant to clause (b) above, as of the Removal
and Repurchase Date, is true and complete in all material respects, (g)
represent and warrant that such removal and repurchase will not result in a
reduction or withdrawal of the rating of any outstanding Series or Class of
Certificates by the applicable Rating Agency, (h) deliver to the Trustee,
each Rating Agency and any Enhancement Providers a Tax Opinion, dated the
Removal and Repurchase Date, with respect to such removal and repurchase, and
(i) deliver to the Trustee and any Enhancement Providers an officers'
certificate confirming the items set forth in clauses (d) through (g) above.
No Designated Accounts shall be removed and no Designated Receivables shall
be repurchased unless each Rating Agency shall have notified the Seller, the
Servicer and the Trustee in writing that such removal and repurchase will not
result in a reduction or withdrawal of such Rating Agency's rating of
any outstanding Series or Class of Certificates.
Upon satisfaction of the above conditions, on the Removal and
Repurchase Date with respect to any such Designated Account and Designated
Receivables, such Designated Account shall be deemed removed, and such
Designated Receivables ("Repurchased Receivables") shall be deemed
repurchased, from the Trust for all purposes.
On each Distribution Date, any amounts on deposit in the Collection
Account on such Distribution Date resulting from payment by the Seller of the
Repurchased Receivables Purchase Price will be applied first, to fund any
unpaid Miscellaneous Payment due on or prior to such Distribution Date and
second, an amount equal to the product of (i) the amount of any Repurchased
Receivables Purchase Price initially deposited by the Seller in the
Collection Account pursuant to such repurchase and (ii) the
40
Monthly Payment Rate for the immediately preceding Collection Period, which
is the percentage obtained by dividing Principal Collections for such
Collection Period by the daily average Pool Balance for such Collection
Period, shall be treated as Principal Collections collected in the
immediately preceding Collection Period.
Notwithstanding the provisions described above, from and after the date
on which no Series issued prior to October 20, 1994 is outstanding, the
Seller shall have the right to require the reassignment to it of all the
Trust's right, title and interest in, to and under the Receivables then
existing and thereafter created, all monies due or to become due and all
amounts received with respect thereto and all proceeds thereof in or with
respect to the Accounts ("Automatic Removed Accounts") designated by the
Seller, upon satisfaction of the following conditions: (a) on or before the
fifth business day immediately preceding the date upon which such Accounts
are to be removed, the Seller shall have given the Trust, each Enhancement
Provider and the Rating Agencies a Removal Notice specifying the date for
removal of the Automatic Removed Accounts (the "Automatic Removal Date"); (b)
on or prior to the date that is five business days after the Automatic
Removal Date, the Seller shall have delivered to the Trustee a computer file
or microfiche or written list containing a true and complete list of the
Automatic Removed Accounts specifying for each such Account, as of the
removal notice date, its account number and the aggregate amount of
Receivables outstanding in such Account; (c) the Seller shall have
represented and warranted as of each Automatic Removal Date that the list of
Automatic Removed Accounts delivered pursuant to clause (b) above, as of the
Automatic Removal Date, is true and complete in all material respects; (d)
the Trustee shall have received confirmation from each Rating Agency that
such removal will not result in a reduction or withdrawal of such Ratings
Agency's rating of any outstanding Series or Class of Certificates; (e) the
Seller shall have delivered to the Trustee, each Rating Agency and any
Enhancement Providers an officers' certificate, dated the Automatic Removal
Date, to the effect that the Seller reasonably believes that such removal
will not cause an Early Amortization Event or Reinvestment Event to occur
with respect to any Series; and (f) the Seller shall have delivered to the
Trustee, each Rating Agency and any Enhancement Providers a Tax Opinion,
dated the Automatic Removal Date, with respect to such removal.
Notwithstanding the provisions described above, from and after the date on
which no Series issued prior to March 10, 1999, is outstanding, the
conditions specified in (a) that relate to Enhancement Providers and Rating
Agencies and the conditions specified in (d), (e) and (f) will not be
required if all of the Accounts to be removed have liquidated and have zero
balances.
Upon satisfaction of the above conditions, on the Automatic Removal
Date all the right, title and interest of the Trust in and to the Receivables
arising in the Automatic Removed Accounts, all monies due and to become due
and all amounts received with respect thereto and all proceeds thereof shall
be deemed removed from the Trust for all purposes.
Excluded Series
A Series of Certificates may be designated as an excluded series (an
"Excluded Series") with respect to a Series of Certificates previously issued
by the Trust as to which the Accumulation Period or Controlled Amortization
Period has commenced (a "Paired Series").
Each Excluded Series will be prefunded with an initial deposit to a
prefunding account in an amount equal to the initial principal balance of
such Excluded Series and primarily from the proceeds of the offering of such
Excluded Series. Any such prefunding account will be held for the benefit of
such Excluded Series and not for the benefit of the Paired Series. As funds
are accumulated in the Principal Funding Account for such Paired Series or
distributed to holders of Certificates of such Paired Series, an equal amount
of funds on deposit in any prefunding account for such prefunded Excluded
Series will be released (which funds will be distributed to the Seller).
Until payment in full of the Paired Series, no Interest Collections,
Principal Collections, Defaulted Amounts or Miscellaneous Payments will be
allocated to the related Excluded Series. In addition, it is expected that
any Excluded Series will be excluded from the calculation of the Required
Participation Amount as described under " -- Addition of Accounts".
41
Collection Account
The Servicer has established and will maintain an Eligible Deposit
Account for the benefit of the Certificateholders in the name of the Trustee,
on behalf of the Trust (the "Collection Account"). "Eligible Deposit Account"
means either (a) a segregated account with an Eligible Institution or (b) a
segregated trust account with the corporate trust department of a depository
institution organized under the laws of the United States or any one of the
states thereof (or any domestic branch of a foreign bank), having corporate
trust powers and acting as trustee for funds deposited in such account, so
long as any of the securities of such depository institution has a credit
rating from each Rating Agency in one of its generic rating categories which
signifies investment grade. "Eligible Institution" means (a) the corporate
trust department of the Trustee or (b) a depository institution organized
under the laws of the United States or any one of the states thereof, or the
District of Columbia (or a domestic branch of a foreign bank), which at all
times (i) has either (x) a long-term unsecured debt rating of A2 or better by
Moody's Investors Service, Inc. ("Moody's") and of AAA or better by Standard
& Poor's Ratings Group ("Standard & Poor's") or (y) a certificate of deposit
rating of P-1 by Moody's or A-1+ by Standard & Poor's and (ii) is a member of
the FDIC. Funds in the Collection Account generally will be invested in
Eligible Investments. "Eligible Investments" are:
(a) book-entry securities, negotiable instruments or securities
represented by instruments in bearer or registered form having original
or remaining maturities of 30 days or less, but in no event occurring
later than the Distribution Date next succeeding the Trustee's
acquisition thereof, except as otherwise provided, with respect to any
Series offered hereby, in the related Series Supplement, which
evidence:
(i) direct obligations of, and obligations fully guaranteed as
to timely payment by, the United States of America;
(ii) demand deposits, time deposits or certificates of deposit
of any depositary institution or trust company incorporated under the
laws of the United States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution
authorities; provided, however, that at the time of the Trust's
investment or contractual commitment to invest therein, the commercial
paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a person or
entity other than such depository institution or trust company)
thereof shall have a credit rating from each of the Rating Agencies in
the highest investment category granted thereby;
(iii) commercial paper having, at the time of the Trust's
investment or contractual commitment to invest therein, a rating from
each of the Rating Agencies in the highest investment category granted
thereby;
(iv) except during a Reinvestment Period with respect to any
Series, investments in money market funds having a rating from each of
the Rating Agencies in the highest investment category granted thereby
or otherwise approved in writing thereby;
(v) bankers' acceptances issued by any depository institution
or trust company referred to in clause (ii) above; and
(vi) certain repurchase obligations, including those of
appropriately rated broker-dealers and financial institutions; and
(b) any other investment consisting of a financial asset that by
its terms converts to cash within a finite period of time, provided
that each Rating Agency shall have notified the Seller, the Servicer
and the Trustee that the Trust's investment therein will not result in
a reduction or withdrawal of the rating of any outstanding Class or
Series with respect to which it is a Rating Agency.
The foregoing notwithstanding, so long as any Series issued by the
Trust prior to October 20, 1994 remains outstanding, funds in the Collection
Account will be invested only in (i) obligations fully guaranteed by the
United States, (ii) demand deposits, time deposits or certificates of deposit
of depository institutions or trust companies, the commercial paper of which
has the highest rating from the applicable Rating Agency, (iii) commercial
paper having at the time of the Trust's investment, a rating
42
in the highest rating category from the applicable Rating Agency, (iv) demand
deposits, time deposits and certificates of deposit which are fully insured
by the FDIC, (v) bankers' acceptances issued by any depository institution or
trust company described in (ii) above, (vi) except during a Reinvestment
Period with respect to any Series, investments in money market funds which
have the highest rating from, or have otherwise been approved in writing by,
each Rating Agency and (vii) certain repurchase obligations (collectively,
"Eligible Investments"). Any earnings (net of losses and investment expenses)
on funds in the Collection Account will be credited to the Collection
Account. The Servicer will have the revocable power to instruct the Trustee
to make withdrawals and payments from the Collection Account for the purpose
of carrying out its duties under the Pooling and Servicing Agreement. The
Servicer may select an appropriate agent as representative of the Servicer
for the purpose of designating such investments.
Excess Funding Account
Except, to the extent provided in the related Series Supplement, during
an Early Amortization Period or Reinvestment Period with respect to a Series,
the Excess Funded Amount, if any, for such Series will be maintained in the
Excess Funding Account established with the Trustee with respect to such
Series. The Excess Funded Amount with respect to a Series will initially
equal the excess, if any, of the initial principal balance of the
Certificates of such Series over the Initial Invested Amount thereof. Funds
on deposit in the Excess Funding Account for a Series will be invested by the
Trustee at the direction of the Servicer generally in Eligible Investments.
Such investments must mature on or prior to the next Distribution Date. The
Servicer may select an appropriate agent as representative of the Servicer
for the purpose of designating such investments.
Funds on deposit in the Excess Funding Account for a Series will be
withdrawn and paid to the Seller or allocated to one or more other Series
which are in Controlled Amortization, Early Amortization, Reinvestment or
Accumulation Periods to the extent of any increases in the Invested Amount of
the Series in question as a result of the addition of Receivables to the
Trust, a reduction in the Seller's Interest, or a reduction in the Initial
Invested Amount of any other Series. Additional amounts will be deposited in
the Excess Funding Account for a Series on a Distribution Date to the extent
that the sum of the Certificateholders' Interest of such Series in Principal
Receivables and the amount on deposit in the Excess Funding Account, if any,
for such Series prior to the deposit on such Distribution Date is less than
the outstanding principal balance of the Certificates of such Series, but
only to the extent that funds are available therefor as provided in the
related Series Supplement. The allocation of additional Receivables to
increase the Invested Amount of each Series that provides for an Excess
Funding Account or similar arrangement involving fluctuating levels of
investment in the Receivables will generally be based on the proportion that
the amount on deposit in the Excess Funding Account for that Series bears to
the amounts on deposit in the Excess Funding Accounts of all Series providing
for Excess Funding Accounts or such similar arrangements or to amounts
otherwise similarly available; and the deposit of amounts in the Excess
Funding Accounts for each such Series will be based on the proportion that
the Adjusted Invested Amount of that Series bears to the Adjusted Invested
Amounts of all Series providing for Excess Funding Accounts or such similar
arrangements.
On each Distribution Date, all investment income earned on amounts in
the Excess Funding Account for any Series since the preceding Distribution
Date will be withdrawn from such Excess Funding Account and applied as
described herein and in the related Prospectus Supplement.
Funds on deposit in the Excess Funding Account for a Series on the
earliest of (i) the commencement of a Reinvestment Period with respect to
such Series, (ii) the commencement of an Early Amortization Period with
respect to such Series and (iii) the Distribution Date or Distribution Dates
specified in or determined in the manner provided in the Series Supplement
for such Series will be distributed to the Certificateholders of such Series
or a Class thereof or deposited in the Principal Funding Account for such
Series or a Class thereof, in each case if and to the extent the related
Series Supplement so provides. In addition, except as otherwise provided in
the related Series Supplement, no funds will be deposited in the Excess
Funding Account for a Series during any Early Amortization Period or
Reinvestment Period with respect to such Series or with respect to any
Collection Period following the Collection Period specified in or determined
in the manner provided in the Series Supplement for such Series.
43
Allocation Percentages
Allocations among Series. Pursuant to the Pooling and Servicing
Agreement, during each Collection Period the Servicer will allocate to each
outstanding Series its share of Interest Collections, Principal Collections,
Defaulted Receivables and Miscellaneous Payments based on the applicable
Series Allocable Interest Collections, Series Allocable Principal
Collections, Series Allocable Defaulted Amount and Series Allocable
Miscellaneous Payments.
"Series Allocable Interest Collections", "Series Allocable
Principal Collections", "Series Allocable Defaulted Amount" and "Series
Allocable Miscellaneous Payments" mean, with respect to any Series of
Certificates for any Collection Period, the product of the Series
Allocation Percentage for such Series and the amount of Interest
Collections and Principal Collections, the Defaulted Amount and
Miscellaneous Payments, respectively, with respect to such Collection
Period.
"Miscellaneous Payments" for any Collection Period means the sum
of (a) Adjustment Payments and Transfer Deposit Amounts received with
respect to such Collection Period and (b) Unallocated Principal
Collections on such Distribution Date available to be treated as
Miscellaneous Payments as described below under "Principal Collections
for all Series".
"Series Allocation Percentage" means, with respect to a Series of
Certificates for any Collection Period, the percentage equivalent of a
fraction, the numerator of which is the Adjusted Invested Amount of
such Series as of the last day of the immediately preceding Collection
Period and the denominator of which is the Trust Adjusted Invested
Amount as of such last day.
"Adjusted Invested Amount" means, with respect to a Series for
any date, an amount equal to the sum of (a) the Initial Invested Amount
of such Series, minus unreimbursed Investor Charge-Offs for such Series
and (b) the Available Subordinated Amount with respect to such Series
(after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Distribution Date during the Collection
Period in which such date occurs).
"Trust Adjusted Invested Amount" means, with respect to any
Collection Period, the sum of the Adjusted Invested Amounts for all
outstanding Series.
"Initial Invested Amount" means, with respect to any Series and
for any date, the amount specified in the related Series Supplement.
The Initial Invested Amount for any Series may be increased or
decreased from time to time as specified in the related Series
Supplement, including as a result of deposits to or withdrawals from
the Excess Funding Account, if any, for such Series.
Allocation Between the Certificateholders and the Seller. The Servicer
will allocate amounts initially allocated to each Series between the
Certificateholders' Interest and the Seller's Interest for each Collection
Period as provided in the related Series Supplement and, with respect to a
Series offered hereby, described in the related Prospectus Supplement. If a
Series consists of more than one Class, such amounts allocated to the
Certificateholders' Interest of such Series will be further allocated between
such Classes as provided in the related Series Supplement and, with respect
to a Series offered hereby, as described in the related Prospectus
Supplement.
Principal Collections for all Series. Principal Collections allocated
to the Certificateholders' Interest of any Series, for any Collection Period
with respect to any Accumulation Period, Controlled Amortization Period,
Reinvestment Period or Early Amortization Period with respect to such Series
or a Class thereof, will first be allocated to make required payments of
principal to the Principal Funding Account or to the Certificateholders of
such Series or a Class thereof, in each case if and to the extent specified
in the Series Supplement for such Series. The Servicer will determine the
amount of available certificateholder principal collections for each Series
and any Collection Period remaining after such required payments, if any
("Excess Principal Collections"). The Servicer will allocate Excess Principal
Collections to cover any principal distributions to Certificateholders of any
Series which are either scheduled or permitted and which have not been
covered out of Principal Collections and certain other
44
amounts allocated to such Series ("Principal Shortfalls"). Excess Principal
Collections will generally not be used to cover Investor Charge-Offs for any
Series. If Principal Shortfalls exceed Excess Principal Collections for any
Collection Period, Excess Principal Collections will be allocated pro rata
among the applicable Series based on the relative amounts of Principal
Shortfalls, unless otherwise provided in the applicable Series Supplements.
To the extent that Excess Principal Collections exceed Principal Shortfalls,
the balance will be paid to the Seller if the Seller's Participation Amount
(determined after giving effect to any Principal Receivables transferred to
the Trust on such date) exceeds the Trust Available Subordinated Amount for
the immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the
Distribution Date immediately following such Determination Date). Any amount
not allocated to the Seller because the Seller's Participation Amount does
not exceed the Trust Available Subordinated Amount will be held unallocated
("Unallocated Principal Collections") until the Seller's Participation Amount
exceeds the Trust Available Subordinated Amount, at which time such amount
will be allocated to the Seller, or until an Early Amortization Period,
Accumulation Period, Controlled Amortization Period or Reinvestment Period
commences for any Series, after which such amount will be treated as a Series
Allocable Miscellaneous Payment.
Allocation of Collections; Deposits in Collection Account
The Servicer, no later than two business days after the processing
date, will deposit all collections received with respect to the Receivables
(excluding, with certain exceptions, certain portions thereof allocable to
the Seller) in each Collection Period into the Collection Account.
Notwithstanding the foregoing requirement for daily deposits, for so long as
(i) CFC remains the Servicer under the Pooling and Servicing Agreement, (ii)
no Service Default has occurred and is continuing and (iii) (x) CFC has and
maintains a short-term debt rating of at least A-1 by Standard & Poor's and
P-1 by Moody's, (y) CFC arranges for and maintains a letter of credit or
other form of Enhancement in respect of the Servicer's obligation to make
deposits of collections on the Receivables in the Collection Account that is
acceptable in form and substance to each Rating Agency or (z) CFC otherwise
obtains the Rating Agency confirmations described below, then, subject to any
limitations in the confirmations referred to below, CFC need not deposit
collections into the Collection Account on the day indicated in the preceding
sentence but may use for its own benefit all such collections until the
business day immediately preceding the related Distribution Date or, provided
that no Series issued prior to October 20, 1994 is outstanding, until such
Distribution Date, at which time CFC will make such deposits in an amount
equal to the net amount of such deposits and withdrawals which would have
been made had the conditions of this sentence not applied; provided, however,
that prior to ceasing daily deposits as described above the Seller shall have
delivered to the Trustee written confirmation from the applicable Rating
Agencies that the failure by CFC to make daily deposits will not result in a
reduction or withdrawal of the rating of any outstanding Series or Class of
Certificates. In addition, during any Collection Period the Servicer will
generally be required to deposit Interest Collections and Principal
Collections into the Collection Account only to the extent of the
distributions required to be made to Certificateholders, the amounts required
to be deposited into any deposit, trust, reserve or similar account
maintained for the benefit of Certificateholders of any Series and certain
other parties and the amounts required to be paid to any Enhancement Provider
on the Distribution Date relating to such Collection Period and if, at any
time prior to such Distribution Date, the amount of collections deposited in
the Collection Account exceeds the amount required to be deposited, the
Servicer will be permitted to withdraw such excess from the Collection
Account.
On any date on which collections are deposited in the Collection
Account, the Servicer will distribute directly to the Seller the amount of
such Interest Collections allocable to each Series specified in the related
Series Supplement and, with respect to a Series offered hereby, described in
the related Prospectus Supplement if the Seller's Participation Amount
(determined after giving effect to any Principal Receivables transferred to
the Trust on such date) exceeds the Trust Available Subordinated Amount for
the immediately preceding Determination Date (after giving effect to the
allocations, distributions, withdrawals and deposits to be made on the
Distribution Date immediately following such Determination Date). In
addition, during the Revolving Period for any Series, subject to certain
45
limitations, the Servicer will distribute directly to the Seller on each such
date of deposit the amount of Principal Collections allocable to each Series
specified in the related Series Supplement and, with respect to a Series
offered hereby, described in the related Prospectus Supplement if the
Seller's Participation Amount (determined after giving effect to any
Principal Receivables transferred to the Trust on such date) exceeds the
Trust Available Subordinated Amount for the immediately preceding
Determination Date (after giving effect to the allocations, distributions,
withdrawals and deposits to be made on the Distribution Date immediately
following such Determination Date).
Limited Subordination of Seller's Interest; Enhancements.
Subordination of Seller's Interest. Credit enhancement with respect to
any Series of Certificates offered hereby will be provided by subordination
of the Seller's Interest to the rights of Certificateholders of such Series
to the extent described in the related Prospectus Supplement. The amount of
such subordination with respect to any Series is referred to herein as the
Available Subordinated Amount for such Series. The Available Subordinated
Amount for any Series offered hereby will be subject to decrease and increase
from time to time if and to the extent described in the related Prospectus
Supplement. The Prospectus Supplement for each Series offered hereby will
describe the manner in which collections attributable to the Available
Subordinated Amount for such Series may be drawn upon to make payments to or
for the benefit of the holders of Certificates of such Series. If so
provided in the related Series Supplements, the Available Subordinated Amount
for a Series may be structured so as to be available to more than one Series
of Certificates.
Enhancements. In addition to the subordination described above, for any
Series, Enhancements may be provided with respect to one or more Classes
thereof. Enhancements with respect to one or more Classes of a Series offered
hereby may include a letter of credit, surety bond, cash collateral account,
spread account, guaranteed rate agreement, swap or other interest protection
agreement, repurchase obligation, cash deposit or another form of credit
enhancement described in the related Prospectus Supplement or any combination
of the foregoing. Enhancements may also be provided to a Series or Class or
Classes of a Series by subordination provisions which require that
distributions of principal and/or interest be made with respect to the
Certificates of such Series or such Class or Classes before distributions are
made to one or more Series or one or more Classes of such Series, if the
Series Supplements with respect thereto so provide. If so specified in the
related Prospectus Supplement, any form of Enhancement may be structured so
as to be available to more than one Class or Series to the extent described
therein.
If Enhancement is provided with respect to a Series offered hereby, the
related Prospectus Supplement will include a description of (a) the amount
payable under such Enhancement, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Enhancement may be reduced and under which such
Enhancement may be terminated or replaced and (d) any material provisions of
any agreement applicable relating to such Credit Enhancement. Additionally,
in certain cases, the related Prospectus Supplement may set forth certain
information with respect to the applicable Enhancement Provider, including
(i) a brief description of its principal business activities, (ii) its
principal place of business, place of incorporation and the jurisdiction
under which it is chartered or licensed to do business, (iii) if applicable,
the identity of regulatory agencies which exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its stockholders'
equity or policyholders' surplus, if applicable, as of a date specified in
the Prospectus Supplement.
Limitations on Subordination and Enhancements. The presence of an
Available Subordinated Amount and/or Enhancement with respect to a Series or
Class is intended to enhance the likelihood of receipt by Certificateholders
of such Series or Class of the full amount of principal and interest with
respect thereto and to decrease the likelihood that such Certificateholders
will experience losses. However, unless otherwise specified in the Prospectus
Supplement for a Series offered hereby, neither subordination of the Seller's
Interest nor the Enhancement, if any, with respect thereto will provide
protection against all risks of loss or will guarantee repayment of the
entire principal balance of the Certificates and interest thereon. If losses
occur which exceed the amount covered by such subordination
46
or Enhancement or which are not covered by such subordination or Enhancement,
Certificateholders will bear their allocable share of deficiencies. In
addition, if specific Enhancement is provided for the benefit of more than
one Class or Series, Certificateholders of any such Class or Series will be
subject to the risk that such Enhancement will be exhausted by the claims of
Certificateholders of other Classes or Series.
Distributions
Payments to Certificateholders of a Series offered hereby or a Class
thereof will be made from the Collection Account and any accounts established
for the benefit of such Certificateholders as described in the related
Prospectus Supplement.
Defaulted Receivables and Recoveries
"Defaulted Receivables" on any Determination Date are (i) all
Receivables which were charged off as uncollectible in respect of the
immediately preceding Collection Period and (ii) all Receivables which were
Eligible Receivables when transferred to the Trust, which arose in an Account
which became an Ineligible Account after the date of transfer of such
Receivables to the Trust and which were not Eligible Receivables for any six
consecutive Determination Dates thereafter. The "Defaulted Amount" for any
Collection Period will be an amount (which shall not be less than zero) equal
to (a) the principal amount of Receivables that became Defaulted Receivables
during the preceding Collection Period minus (b) the sum of (i) the full
amount of any Defaulted Receivables subject to reassignment to the Seller or
purchase by the Servicer for such Collection Period unless certain events of
bankruptcy, insolvency or receivership have occurred with respect to either
of the Seller or the Servicer, in which event the Defaulted Amount will not
be reduced for those Defaulted Receivables and (ii) the excess, if any, for
the immediately preceding Determination Date of the amount determined
pursuant to this clause (b) for such Determination Date over the
amount determined pursuant to clause (a) for such Determination Date.
Receivables will be charged off as uncollectible in accordance with the
Servicer's customary and usual policies and procedures for servicing its own
comparable revolving dealer wholesale loan accounts. A portion of the Series
Allocable Defaulted Amount for each Series and Collection Period will be
allocated between the Certificateholders of such Series and the Seller as
provided in the related Series Supplement. The portion of the Defaulted
Amount allocated to the Certificateholders of a Series is referred to as the
"Investor Default Amount" for such Series. The Investor Default Amount for
any Series that consists of more than one Class will be further allocated
between such Classes as provided in the related Series Supplement.
If the Servicer adjusts the amount of any Receivable because of a
rebate, billing error or certain other noncash items to a Dealer, or because
such Receivable was created in respect of inventory which was refused or
returned by a Dealer, the principal amount of each of the Seller's Interest
and the Pool Balance will be reduced by the amount of the adjustment or
charge-off. Furthermore, to the extent that the reduction in the Seller's
Interest would reduce the Seller's Participation Amount below the Trust
Available Subordinated Amount for the immediately preceding Determination
Date (after giving effect to the allocations, distributions, withdrawals and
deposits to be made on the Distribution Date immediately following such
Determination Date), the Seller will deposit a cash amount equal to such
deficiency into the Collection Account in immediately available funds (an
"Adjustment Payment") on the day on which such adjustment occurs.
Optional Repurchase
If so provided in a Prospectus Supplement relating to a Series of
Certificates offered hereby, on any Distribution Date occurring after the
Invested Amount of the Certificates of such Series is reduced to the
percentage of the initial outstanding principal amount of the Certificates of
such Series specified therein, CFC will have the option, subject to
certain conditions, to repurchase the Certificateholders' Interest of such
Series. The purchase price will generally be equal to the Invested Amount of
such Series on the Determination Date preceding the Distribution Date on
which such repurchase will be made plus accrued and unpaid interest on the
unpaid principal amount of the Certificates of such Series at the
47
applicable certificate rate (together with interest on overdue interest),
plus any other amounts specified in the related Series Supplement. The
purchase price will be deposited in the Collection Account in immediately
available funds on the Distribution Date on which CFC exercises such
option. Following any such purchase, the Certificateholders of such Series
will have no further rights with respect to the Certificateholders' Interest
of such Series, other than the right to receive the final distribution on the
Certificates of that Series. In the event that CFC fails for any reason to
deposit such purchase price, payments will continue to be made to the
Certificateholders of such Series as described in the related Prospectus
Supplement.
Reinvestment Events and Early Amortization Events
Commencing on the first Distribution Date following the Collection
Period in which a Reinvestment Event has occurred with respect to any Series,
Principal Collections allocable to the Certificateholders' Interest of such
Series will no longer be paid to USA or allocated to any other Series but
instead will be deposited to the Principal Funding Account for such Series
monthly on each Distribution Date, and the Controlled Deposit Amount or
Controlled Amortization Amount, if any, will no longer apply to distributions
of principal in respect of the Certificates of such Series, in each case
except as described below or provided in the related Series Supplement. A
"Reinvestment Event" refers to, for any Series, any of the events so defined
in the Series Supplement relating to that Series and, with respect to any
Series offered hereby, described in the related Prospectus Supplement.
Upon the occurrence of any event so defined, a Reinvestment Event will
be deemed to have occurred with respect to such Series without any notice or
other action on the part of any other party immediately upon the occurrence
of such event. The Reinvestment Period with respect to such Series will
commence as of the close of business on the business day immediately
preceding the day on which the Reinvestment Event is deemed to have occurred.
Monthly deposits of principal to the Principal Funding Account for such
Series will, except as described below or provided in the related Series
Supplement, begin on the first Distribution Date following the Collection
Period in which a Reinvestment Period has commenced with respect to such
Series.
Commencing on the first Distribution Date following the Collection
Period in which an Early Amortization Event has occurred with respect to any
Series, Principal Collections allocable to the Certificateholders' Interest
of such Series will no longer be paid to USA, allocated to any other Series
or retained in the Principal Funding Account for such Series but
instead will be distributed to Certificateholders of such Series monthly on
each Distribution Date and the Controlled Deposit Amount or Controlled
Amortization Amount, if any, will no longer apply to distributions of
principal on the Certificates of such Series, in each case except as
described below or provided in the related Series Supplement. An "Early
Amortization Event" refers to, for any Series, any of the events so defined
in the Series Supplement relating to the Series and, with respect to any
Series offered hereby, described in the related Prospectus Supplement, as
well as either of the following events:
1. the occurrence of certain events of bankruptcy, insolvency or
receivership relating to the Trust or the Seller; and
2. the Trust or USA becomes an investment company within the
meaning of the Investment Company Act of 1940, as amended.
Upon the occurrence of any event described above or in the Prospectus
Supplement for a Series offered hereby, an Early Amortization Event will be
deemed to have occurred with respect to such Series without any notice or
other action on the part of any other party immediately upon the occurrence
of such event. The Early Amortization Period with respect to such Series will
commence as of the close of business on the business day immediately
preceding the day on which the Early Amortization Event is deemed to have
occurred. Monthly distributions of principal to the Certificateholders of
such Series will begin on the first Distribution Date following the
Collection Period in which an Early Amortization Period has commenced with
respect to such Series, except as described below. The failure of the Trust
to pay the outstanding principal amount of the Certificates of any Series or
Class by the Expected
48
Payment Date therefor will have the same consequences as the occurrence of an
Early Amortization Event with respect to such Series or Class; and all
references herein to Early Amortization Events shall be deemed to include
such a failure.
Notwithstanding the commencement of a Reinvestment Period or an Early
Amortization Period with respect to a Series of Certificates, such period may
terminate and the Revolving Period with respect to such Series and any Class
thereof may commence when the event giving rise to the commencement of such
Reinvestment Period or Early Amortization Period no longer exists, whether as
a result of the distribution of principal to Certificateholders of such
Series or otherwise, in each case if and to the extent provided in the Series
Supplement for such Series.
In addition to the consequences of a Reinvestment Event or an Early
Amortization Event with respect to any Series discussed above, if an
insolvency event occurs with respect to USA, or USA violates its covenant not
to create any lien on any Receivable, in each case as provided in the Pooling
and Servicing Agreement, on the day of such insolvency event or such
violation, as applicable, USA will (subject to the actions of the
Certificateholders) immediately cease to transfer Receivables to the Trust
and promptly give notice to the Trustee of such insolvency event or
violation, as applicable. Under the terms of the Pooling and Servicing
Agreement, within 15 days the Trustee will publish a notice of such
insolvency event or violation stating that the Trustee intends to sell,
liquidate or otherwise dispose of the Receivables in a commercially
reasonable manner and on commercially reasonable terms, unless within a
specified period of time holders of Certificates of each outstanding Series
representing more than 50% of the aggregate unpaid principal amount of the
Certificates of each such Series (or, with respect to any Series with two or
more Classes, the Certificates of each such Class) and each person holding a
Supplemental Certificate, instruct the Trustee not to sell, dispose of or
otherwise liquidate the Receivables and to continue transferring Receivables
as before such insolvency event or violation, as applicable. If the portion
of such proceeds allocated to the Certificateholders' Interest and the
proceeds of any collections on the Receivables in the Collection Account
allocable to the Certificateholders' Interest are not sufficient to pay the
aggregate unpaid principal balance of the Certificates in full plus accrued
and unpaid interest thereon, Certificateholders will incur a loss.
Termination; Fully Reinvested Date
Termination. The Trust will terminate on the earlier to occur of (a)
the day following the Distribution Date on which the aggregate Invested
Amounts for all Series is zero, (b) May 31, 2012 and (c) the date on which
proceeds from the sale, disposal or other liquidation of the Receivables are
distributed to the Certificateholders following an insolvency event with
respect to USA or any violation by USA of its covenant not to create any lien
on any Receivable, in each case as provided in the Pooling and Servicing
Agreement and as described above under "Reinvestment Events and Early
Amortization Events". Upon termination of the Trust, all right, title and
interest in the Receivables and other funds of the Trust (other than amounts
in the Collection Account, any Principal Funding Account, Interest Funding
Account, Excess Funding Account or other account for the final distribution
of principal and interest to Certificateholders) will be conveyed and
transferred to USA.
In any event, the last payment of principal and interest on any Series
of Certificates will be due and payable no later than the date specified in
the related Prospectus Supplement (the "Series Termination Date").
Fully Reinvested Date. Following the occurrence of the Fully Reinvested
Date with respect to any Series, Certificateholders of that Series will no
longer have any interest in the Receivables and all the representations and
covenants of the Seller and the Servicer relating to the Receivables, as well
as certain other provisions of the Pooling and Servicing Agreement and all
remedies for breaches thereof, will no longer accrue to the benefit of the
Certificateholders of that Series, in each case unless the Revolving Period
with respect to such Series recommences as provided in the related Series
Supplement. Those representations, covenants and other provisions include the
conditions to the exchange of the Seller's Certificate described under "The
Seller's Certificate", the conditions to the issuance of a new Series
described under "New Issuances", the representations described under
"Representations and
49
Warranties" to the extent they relate to the Receivables and the Collateral
Security, the limitations on additions and removals of Accounts described
under "Addition of Accounts" and "Removal of Accounts", respectively, and the
obligations of the Servicer with respect to servicing the Receivables
described under "Collection and Other Servicing Procedures" and "Servicer
Covenants". In addition, upon the occurrence of the Fully Reinvested Date
with respect to any Series, no Interest Collections, Principal Collections,
Defaulted Receivables or Miscellaneous Payments will be allocated to that
Series, unless the Revolving Period with respect thereto recommences as
described above. Notwithstanding the foregoing, when the final distribution
has been made with respect to each Series of Certificates or the Fully
Reinvested Date has occurred with respect thereto, all right, title and
interest in the Receivables will be conveyed and transferred to USA.
Indemnification
The Pooling and Servicing Agreement provides that the Servicer will
indemnify the Trust and the Trustee from and against any loss, liability,
expense, damage or injury suffered or sustained arising out of any acts,
omissions or alleged acts or omissions arising out of activities of the
Trust, the Trustee or the Servicer pursuant to the Pooling and Servicing
Agreement; provided, that, the Trust or the Trustee will not be so
indemnified if such acts, omissions or alleged acts or omissions constitute
fraud, gross negligence, breach of fiduciary duty or willful misconduct by
the Trustee. However, the Servicer will not indemnify the Trust, the Trustee
or the Certificateholders for any act taken by the Trustee at the request of
the Certificateholders or for any tax required to be paid by the Trust or the
Certificateholders.
The Pooling and Servicing Agreement provides that, except as described
above and with certain other exceptions, neither the Seller, the Servicer nor
any of their directors, officers, employees or agents will be under any
liability to the Trust, the Trustee, the Certificateholders or any other
person for taking any action, or for refraining from taking any action,
pursuant to the Pooling and Servicing Agreement. However, neither the Seller,
the Servicer nor any of their directors, officers, employees or agents will
be protected against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or gross negligence of any such person in
the performance of their duties or by reason of reckless disregard of their
obligations and duties thereunder.
In addition, the Pooling and Servicing Agreement provides that the
Servicer is not under any obligation to appear in, prosecute or defend any
legal action which is not incidental to its servicing responsibilities under
the Pooling and Servicing Agreement. The Servicer may, in its sole
discretion, undertake any such legal action which it may deem necessary or
desirable for the benefit of the Certificateholders with respect to the
Pooling and Servicing Agreement and the rights and duties of the parties
thereto and the interest of the Certificateholders thereunder.
Collection and Other Servicing Procedures
Pursuant to the Pooling and Servicing Agreement, the Servicer is
responsible for servicing, collecting, enforcing and administering the
Receivables in accordance with customary and usual procedures for servicing
its own revolving credit line dealer wholesale loans, except where the
failure to so act would not materially and adversely affect the rights of the
Trust.
CFC covenants that it may only change the terms relating to the
Accounts if (i) in the Servicer's reasonable judgment, no Early Amortization
Event or Reinvestment Event will occur with respect to any Series as a result
of the change and (ii) the change is made applicable to the comparable
segment of the portfolio of revolving credit line dealer wholesale
loan accounts with similar characteristics owned or serviced by CFC and not
only to the Accounts.
Servicing activities to be performed by the Servicer include collecting
and recording payments, communicating with dealers, investigating payment
delinquencies, evaluating the increase of credit limits, and maintaining
internal records with respect to each Account. Managerial and custodial
services performed by the Servicer on behalf of the Trust include providing
assistance in any inspections of the documents and records relating to the
Accounts and Receivables by the Trustee pursuant to the Pooling
50
and Servicing Agreement, maintaining the agreements, documents and files
relating to the Accounts and Receivables as custodian for the Trust and
providing related data processing and reporting services for
Certificateholders and on behalf of the Trustee.
Servicer Covenants
In the Pooling and Servicing Agreement the Servicer covenants that: (a)
it will duly satisfy all obligations on its part to be fulfilled under or in
connection with the Receivables and the Accounts, will maintain in effect all
qualifications required in order to service the Receivables and the Accounts
and will comply in all material respects with all requirements of law in
connection with servicing the Receivables and the Accounts, the failure to
comply with which would have a materially adverse effect on the
Certificateholders of any outstanding Series; (b) it will not permit any
rescission or cancellation of a Receivable except as ordered by a court of
competent jurisdiction or other government authority; (c) it will do nothing
to impair the rights of the Certificateholders in the Receivables or the
Accounts; and (d) it will not reschedule, revise or defer payments due on any
Receivable except in accordance with its guidelines for servicing revolving
credit line dealer wholesale loans.
Under the terms of the Pooling and Servicing Agreement, if the Seller
or the Servicer discovers, or receives written notice, that any covenant of
the Servicer set forth above has not been complied with in all material
respects and such noncompliance has not been cured within 30 days thereafter
(or such longer period as the Trustee may agree to) and has a materially
adverse effect on the interests of all Certificateholders in any Receivable
or Account, CFC, as Servicer, will purchase such Receivable or all
Receivables in such Account, as applicable. If CFC is the Servicer, such
purchase will be made on the Determination Date following the expiration of
the 30-day cure period and the Servicer will be obligated to deposit into the
Collection Account an amount equal to the amount of such Receivable plus
accrued and unpaid interest thereon. The amount of such deposit shall be
deemed a Transfer Deposit Amount. The purchase by the Servicer constitutes
the sole remedy available to the Certificateholders if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any
such purchased Receivables shall be automatically assigned to the Servicer.
Servicing Compensation and Payment of Expenses
Unless otherwise provided in the related Series Supplement and, with
respect to a Series offered hereby, described in the related Prospectus
Supplement, the Servicer's compensation with respect to the Certificates of a
Series for its servicing activities and reimbursement for its expenses will
be a monthly servicing fee (the "Servicing Fee") in an amount payable in
arrears on each Distribution Date on or before the Series Termination Date of
that Series and the Fully Reinvested Date, if any, of that Series (and
thereafter during the Revolving Period with respect to such Series, if such
Revolving Period recommences) generally equal to one-twelfth of the product
of (a) the "Servicing Fee Rate" set forth in such Series Supplement, (b) the
Pool Balance as of the last day of the second preceding Collection Period and
(c) the Series Allocation Percentage for such Series for the immediately
preceding Collection Period. Unless otherwise specified in a related Series
Supplement and, with respect to a Series offered hereby, described in the
related Prospectus Supplement, the share of the Servicing Fee allocable to
Certificateholders of any Series with respect to any Distribution Date (the
"Monthly Servicing Fee") shall generally be equal to one-twelfth of the
product of (a) the Servicing Fee Rate and (b) the Invested Amount of such
Series as of the last day of the second preceding Collection Period. The
remainder of the Servicing Fee with respect to any Series shall be paid by
the Seller. The Monthly Servicing Fee with respect to any Series shall be
payable to the Servicer solely to the extent amounts are available for
distribution therefor in accordance with the terms of the Pooling and
Servicing Agreement.
The Servicer will be permitted to waive its right to receive the
Servicing Fee with respect to any Series on any Distribution Date, so long as
it believes that sufficient Interest Collections will be available on a
future Distribution Date to pay the Monthly Servicing Fee relating to such
waived Servicing Fee, in which case the Servicing Fee and the Monthly
Servicing Fee for such Series and such Distribution Date shall be
deemed to be zero.
51
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Accounts and the Receivables
including, without limitation, payment of fees and disbursements of the
Trustee and independent accountants and all other fees and expenses which are
not expressly stated in the Pooling and Servicing Agreement to be payable by
the Trust or the Certificateholders other than federal, state and local
income and franchise taxes, if any, of the Trust or the Certificateholders.
Certain Matters Regarding the Servicer
The Servicer may not resign from its obligations and duties under the
Pooling and Servicing Agreement, except upon determination that such duties
are no longer permissible under applicable law. No such resignation will
become effective until the Trustee or a successor to the Servicer has assumed
the Servicer's responsibilities and obligations under the Pooling and
Servicing Agreement.
Any person into which, in accordance with the Pooling and Servicing
Agreement, the Servicer may be merged or consolidated or any person resulting
from any merger or consolidation to which the Servicer is a party, or any
person succeeding to the business of the Servicer, will be the successor to
the Servicer under the Pooling and Servicing Agreement.
Service Default
In the event of any Service Default (as defined below), the Trustee, by
written notice to the Servicer, may terminate all of the rights and
obligations of the Servicer, as servicer, under the Pooling and Servicing
Agreement and in and to the Receivables and the proceeds thereof and appoint
a new Servicer (a "Service Transfer"). The rights and interest of the Seller
under the Pooling and Servicing Agreement in the Seller's Interest will not
be affected by any Service Transfer. The Trustee shall as promptly as
possible appoint a successor Servicer and if no successor Servicer has been
appointed by the Trustee and has accepted such appointment by the time the
Servicer ceases to act as Servicer, all rights, authority, power and
obligations of the Servicer under the Pooling and Servicing Agreement shall
pass to and be vested in the Trustee. Prior to any Service Transfer, the
Trustee will review any bids obtained from potential servicers meeting
certain eligibility requirements set forth in the Pooling and Servicing
Agreement to serve as successor Servicer for servicing compensation not in
excess of the Servicing Fee, plus certain excess amounts payable to the
Seller.
A "Service Default" refers to any of the following events:
1. failure by the Servicer to make any payment, transfer or
deposit, or to give instructions to the Trustee to make any payment,
transfer or deposit, on the date the Servicer is required to do so
under the Pooling and Servicing Agreement, which is not cured within a
five business day grace period;
2. failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer in the Pooling and
Servicing Agreement which failure has a materially adverse effect on
the Certificateholders of any outstanding Series and which continues
unremedied for a period of 30 days after the date written notice of
such failure shall have been given to the Servicer by the Trustee, or
the Servicer delegates its duties under the Pooling and Servicing
Agreement, except as specifically permitted thereunder;
3. any representation, warranty or certification made by the
Servicer in the Pooling and Servicing Agreement or in any certificate
delivered pursuant to the Pooling and Servicing Agreement proves to
have been incorrect in any material respect when made, has a materially
adverse effect on the rights of the Certificateholders of any
outstanding Series, and which materially adverse effect continues for a
period of 60 days after written notice thereof shall have been given to
the Servicer by the Trustee; or
4. the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
52
Notwithstanding the foregoing, a delay in or failure of performance
referred to under clause (1) above for a period of ten business days or
referred to under clauses (2) or (3) for a period of 60 business days, shall
not constitute a Service Default if such delay or failure was caused by an
act of God or other similar occurrence. Upon the occurrence of any such
event, the Servicer shall not be relieved from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of
the Pooling and Servicing Agreement and the Servicer shall provide the
Trustee, any Enhancement Provider, the Seller and the Certificateholders
prompt notice of such failure or delay by it, together with a description of
its efforts to so perform its obligations. The Servicer shall immediately
notify the Trustee in writing of any Service Default.
Reports
On each Distribution Date (including each Distribution Date that
corresponds to an Interest Payment Date or any Special Payment Date), the
Trustee will forward to each Certificateholder of record of any Series a
statement (the "Distribution Date Statement") prepared by the Servicer
setting forth certain information with respect to the Trust and the
Certificates of such Series, as specified in the related Series Supplement
and, with respect to any Series offered hereby, described in the related
Prospectus Supplement.
With respect to each Interest Payment Date or Special Payment Date, the
Distribution Date Statement with respect to any Series will include the
following information with respect to the Certificates of such Series: (a)
the total amount distributed on the Certificates of such Series; (b) the
amount of such distribution allocable to principal on the Certificates of
such Series; and (c) the amount of such distribution allocable to interest on
the Certificates of such Series.
On or before January 31 of each calendar year, the Trustee will furnish
(or cause to be furnished) to each person who at any time during the
preceding calendar year was a Certificateholder of record a statement
containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the
applicable portion thereof during which such person was a Certificateholder,
together with such other customary information as is required to be provided
by an issuer of indebtedness under the Code and such other customary
information as is necessary to enable the Certificateholders to prepare their
tax returns. See "Certain Tax Matters".
Evidence as to Compliance
The Pooling and Servicing Agreement provides that on or before March 31
of each calendar year, the Servicer will cause a firm of nationally
recognized independent public accountants (who will also render other
services to the Servicer or the Seller) to furnish a report relating to
certain matters in connection with the servicing of CFC's portfolio of
wholesale receivables.
The Pooling and Servicing Agreement provides for delivery to the
Trustee on or before March 31 of each calendar year, of a statement signed by
an officer of the Servicer to the effect that the Servicer has fully
performed, or caused to be fully performed its obligations in all material
respects under the Pooling and Servicing Agreement throughout the preceding
year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the
Trustee may be obtained by a request in writing delivered to the Trustee.
Amendments
The Pooling and Servicing Agreement and any Series Supplement may be
amended by the Seller, the Servicer and the Trustee, without
Certificateholder consent, so long as any such action shall not, as evidenced
by an opinion of counsel, adversely affect in any material respect the
interests of the Certificateholders.
The Pooling and Servicing Agreement and any Series Supplement may be
amended by the Seller, the Servicer and the Trustee with the consent of the
holders of Certificates evidencing not less than 66-2/3% of the aggregate
unpaid principal amount of the Certificates of all adversely affected Series
for the
53
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Pooling and Servicing Agreement or
of modifying in any manner the rights of Certificateholders. No such
amendment, however, may (a) reduce in any manner the amount of or delay the
timing of distributions required to be made to Certificateholders or deposits
of amounts to be so distributed without the consent of each affected
Certificateholder, (b) change the definition or the manner of calculating any
Certificateholders' Interest without the consent of each affected
Certificateholder, (c) reduce the amount available under any Enhancement
without the consent of each affected Certificateholder, (d) adversely affect
the rating of any Series or Class by each Rating Agency without the consent
of the holders of Certificates of such Series or Class evidencing not less
than 66-2/3% of the aggregate unpaid principal amount of the Certificates of
such Series or Class or (e) reduce the aforesaid percentage of the unpaid
principal amount of Certificates the holders of which are required to consent
to any such amendment without the consent of each Certificateholder.
Promptly following the execution of any amendment to the Pooling and
Servicing Agreement (other than an amendment described in the preceding
paragraph), the Trustee will furnish written notice of the substance of such
amendment to each Certificateholder.
The foregoing notwithstanding, each holder of a Certificate offered
hereby, by its acceptance thereof, will be deemed to have consented to an
amendment to the Pooling and Servicing Agreement that (i) provides that funds
in the Collection Account may be invested in any Eligible Investments, (ii)
provides that the Seller need not make any deposit to the Collection Account
in respect of the Repurchased Receivables Price of any Designated Receivables
repurchased from the Trust, (iii) otherwise changes the procedures for
removing Receivables from the Trust as described under "Removal of Accounts",
(iv) provides that, subject to the limitations described herein, CFC need not
deposit collections with respect to any Collection Period in the Collection
Account until the related Distribution Date and (v) permits the designation
of Automatic Additional Accounts as described herein.
The Pooling and Servicing Agreement may not be amended in any manner
which materially adversely affects the interests of any Enhancement Provider
without its prior consent.
List of Certificateholders
Upon written request of any three or more Certificateholders of record
the Trustee will afford such Certificateholders access during business hours
to the current list of Certificateholders of a Series or all outstanding
Series, as applicable, for purposes of communicating with other
Certificateholders of such Series or all outstanding Series, as applicable,
with respect to their rights under the Pooling and Servicing Agreement. See
"Book-Entry Registration" and "Definitive Certificates".
The Pooling and Servicing Agreement will not provide for any annual or
other meetings of Certificateholders.
The Trustee
The Bank of New York, a New York banking corporation, will act as
Trustee under the Pooling and Servicing Agreement. On August 23, 1996, The
Bank of New York, a New York banking corporation, succeeded Manufacturers and
Traders Trust Company, as Trustee, in accordance with the terms of the
Pooling and Servicing Agreement and pursuant to an Agreement of Resignation,
Appointment and Acceptance dated as of August 23, 1996 between USA, CFC, as
successor to CFC Corp., Manufacturers and Traders Trust Company, as resigning
trustee, and The Bank of New York, as successor trustee. The Corporate Trust
Office of the Bank of New York is located at 101 Barclay Street, New York,
New York 10286. The Seller, the Servicer and their respective affiliates may
from time to time enter into normal banking and trustee relationships with
the Trustee and its affiliates. The Trustee may hold Certificates in its own
name with the same rights it would have if it were not the Trustee. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the Trustee shall have the power to appoint a co-trustee or
separate trustees of all or a part of the Trust. In the event of such
appointments, all rights, powers, duties and obligations shall be conferred
or imposed upon the Trustee and such separate trustee or co-trustee jointly,
or, in any jurisdiction in which the Trustee shall be incompetent or
unqualified to
54
perform certain acts, singly upon such separate trustee or co-trustee, who
shall exercise and perform such rights, powers, duties and obligations solely
at the direction of the Trustee.
The Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling and Servicing Agreement or if the Trustee becomes insolvent. In such
circumstances, the Servicer may appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee does not
become effective until the acceptance of the appointment by the successor
Trustee.
DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
The Receivables initially transferred to the Trust by CARCO were
acquired by CARCO, and subsequent to the CARCO Transfer, were acquired by
USA, from CCC pursuant to the Receivables Purchase Agreement. Upon the merger
of CCC (a wholly owned subsidiary of CFC Corp.) into CFC Corp., CFC Corp. in
accordance with the terms of the Receivables Purchase Agreement assumed CCC's
obligations under the Receivables Purchase Agreement as the RPA Seller; and
upon the merger of CFC Corp. into CFC, CFC in accordance with the terms of
that agreement assumed CFC Corp.'s obligations thereunder as the RPA Seller.
The following summary describes certain terms of the Receivables Purchase
Agreement and is qualified in its entirety by reference to the Receivables
Purchase Agreement.
Sale or Transfer of Receivables
Pursuant to the Receivables Purchase Agreement, the RPA Seller sold or
transferred to the Seller all of its right, title and interest in and to all
of the Receivables and the Collateral Security as of the Initial Cut-Off Date
and all of the Receivables thereafter created. In addition, the RPA Seller
has previously designated Additional Accounts, and has previously conveyed to
the Seller the Principal Receivables in such Additional Accounts (together
with the related Collateral Security) as of the applicable Additional Cut-Off
Date and all Receivables (and related Collateral Security) created
thereafter. As described herein, pursuant to the Pooling and Servicing
Agreement, the Seller has transferred to the Trust all of its right, title
and interest in and to the Receivables Purchase Agreement.
In connection with the sale or transfer of the Receivables to the
Seller, the RPA Seller is required to indicate in its computer files that the
Receivables have been sold or transferred to the Seller, and that such
Receivables have been transferred by the Seller to the Trust. In addition,
the RPA Seller is required to provide to the Seller a computer file or
microfiche or written list containing a true and complete list of all such
Receivables. The records and agreements relating to the Accounts and
Receivables have not and will not be segregated by the RPA Seller from other
documents and agreements relating to other accounts and receivables and are
not and will not be stamped or marked to reflect the sale or transfer of the
Receivables to the Seller, but the computer records of the RPA Seller have
been and will be marked to evidence such sale or transfer. The RPA Seller has
filed UCC financing statements with respect to the Receivables meeting the
requirements of Michigan state law. See "Risk Factors -- Certain Legal
Aspects" and "Certain Legal Aspects of the Receivables -- Transfer of
Receivables".
Representations and Warranties
The RPA Seller has or will make certain representations and warranties
to the Seller to the effect, among other things, that as of the Initial
Closing Date and each Series Issuance Date, it was duly incorporated and in
good standing and that it has the authority to consummate the transactions
contemplated by the Receivables Purchase Agreement.
The RPA Seller has or will also make representations and warranties to
the Seller relating to the Receivables to the effect, among other things,
that (a) as of the Initial Closing Date and each Series Issuance Date, each
of the Accounts is an Eligible Account and (b) as of the date any new
Receivable is created, such Receivable is an Eligible Receivable. In the
event of a breach of any representation and
55
warranty set forth in this paragraph which results in an Ineligible
Receivable and the requirement that the Seller accept retransfer of such
Ineligible Receivable pursuant to the Pooling and Servicing Agreement, the
RPA Seller shall repurchase such Ineligible Receivable from the Seller on the
date of such retransfer. The purchase price for such Ineligible Receivable
shall be the face amount thereof, of which at least the amount of any cash
deposit required to be made by the Seller under the Pooling and Servicing
Agreement in respect of the retransfer of such Ineligible Receivable shall be
paid in cash.
The RPA Seller has or will also make representations and warranties to
the Seller to the effect, among other things, that as of the Initial Closing
Date and each Series Issuance Date (a) the Receivables Purchase Agreement
constitutes a legal, valid and binding obligation of the RPA Seller and (b)
the Receivables Purchase Agreement constitutes a valid sale or transfer to
the Seller of all right, title and interest of the RPA Seller in and to the
Receivables, whether then existing or thereafter created in the Accounts, the
Collateral Security and the proceeds thereof which is effective as to each
Receivable upon the creation thereof. If the breach of any of the
representations and warranties described in this paragraph results in the
obligation of the Seller under the Pooling and Servicing Agreement to accept
retransfer of the Receivables, the RPA Seller will repurchase the Receivables
retransferred to the RPA Seller for an amount of cash equal to the amount of
cash the Seller is required to deposit under the Pooling and Servicing
Agreement in connection with such retransfer.
The RPA Seller has agreed to indemnify the Seller and to hold the
Seller harmless from and against any and all losses, damages and expenses
(including reasonable attorneys' fees) suffered or incurred by the Seller if
the foregoing representations and warranties are materially false.
Certain Covenants
In the Receivables Purchase Agreement, the RPA Seller has covenanted
that it will perform its obligations under the agreements relating to the
Receivables and the Accounts in conformity with its current policies and
procedures relating to the Receivables and the Accounts.
The RPA Seller has covenanted further that, except for the sale and
conveyances under the Receivables Purchase Agreement and the interests
created under the Pooling and Servicing Agreement, the RPA Seller will not
sell, pledge, assign or transfer any interest in the Receivables to any other
person. The RPA Seller also has covenanted to defend and indemnify the Seller
for any loss, liability or expense incurred by the Seller in connection with
a breach by the RPA Seller of any of its representations, warranties or
covenants contained in the Receivables Purchase Agreement.
In addition, the RPA Seller has expressly acknowledged and consented to
the Seller's assignment of its rights relating to the Receivables under the
Receivables Purchase Agreement to the Trustee.
Termination
The Receivables Purchase Agreement will terminate immediately after the
Trust terminates. In addition, if pursuant to certain provisions of federal
law the RPA Seller becomes party to any bankruptcy or similar proceeding
(other than as a claimant) and, if such proceeding is not voluntary and is
not dismissed within 60 days of its institution, the RPA Seller will
immediately cease to sell or transfer Receivables to the Seller and will
promptly give notice of such event to the Seller and to the Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
On the Initial Closing Date, the RPA Seller sold and assigned the
Receivables to the Seller, which Receivables were immediately sold and
assigned to the Trust. The Seller has represented and warranted and will
represent and warranty on the Series Issuance Date with respect to each
Series that such sale to the Trust constituted a valid transfer and
assignment to the Trust of all right, title and interest of the Seller in and
to the Receivables and that, under the UCC (as in effect in Michigan), there
exists a valid,
56
subsisting and enforceable first-priority perfected ownership interest in the
Receivables, in existence at the time of the formation of the Trust or at the
date of addition of any Additional Accounts, in favor of the Trust and a
valid, subsisting and enforceable first-priority perfected ownership interest
in the Receivables created thereafter in favor of the Trust on and after
their creation. However, the transfer of Receivables by the Seller to the
Trust could be deemed to create a security interest under the UCC. For a
discussion of the Trust's rights arising from these representations and
warranties not being satisfied, see "Description of the Certificates --
Representations and Warranties".
Each of the RPA Seller and the Seller has represented that the
Receivables are "chattel paper" for purposes of the UCC as in effect in
Michigan. If the Receivables are deemed to be chattel paper and the transfer
thereof by either the RPA Seller to the Seller or by the Seller to the Trust
is deemed either to be a sale or to create a security interest, the UCC as in
effect in Michigan applies and the transferee must either take possession of
the chattel paper or file an appropriate financing statement or statements in
order to perfect its interest therein. Financing statements covering the
Receivables have been filed under the UCC as in effect in Michigan by both
the Seller and the Trust to perfect their respective interests in the
Receivables and continuation statements will be filed as required to continue
the perfection of such interests. The Receivables have not and will not be
stamped to indicate the interest of the Seller or the Trustee.
There are certain limited circumstances under the UCC and applicable
federal law in which prior or subsequent transferees of Receivables could
have an interest in such Receivables with priority over the Trust's interest.
A purchaser of the Receivables who gives new value and takes possession of
the instruments which evidence the Receivables (i.e., the chattel paper) in
the ordinary course of such purchaser's business may, under certain
circumstances, have priority over the interest of the Trust in the
Receivables. A tax or other government lien on property of the RPA Seller or
the Seller arising prior to the time a Receivable is conveyed to the Trust
may also have priority over the interest of the Trust in such Receivable.
Under the Receivables Purchase Agreement, the RPA Seller will warrant to the
Seller, and under the Pooling and Servicing Agreement, the Seller has
warranted to the Trust, that the Receivables have been transferred free and
clear of the lien of any third party. Each of the RPA Seller and the Seller
has also covenanted that it will not sell, pledge, assign, transfer or grant
any lien on any Receivable or, except as described under "Description of the
Certificates -- The Seller's Certificate", the Seller's Certificate (or any
interest therein) other than to the Trust. In addition, while CFC is the
Servicer, cash collections on the Receivables may, under certain
circumstances, be commingled with the funds of CFC prior to each
Distribution Date and, in the event of the bankruptcy of CFC, the Trust may
not have a perfected interest in such collections.
Certain Matters Relating to Bankruptcy
The RPA Seller has warranted to the Seller in the Receivables Purchase
Agreement that the sale of the Receivables by it to the Seller is a valid
sale of the Receivables to the Seller. In addition, the RPA Seller and the
Seller have agreed to treat the transactions described herein as a sale of
the Receivables to the Seller, and the RPA Seller has or will take all
actions that are required under Michigan law to perfect the Seller's
ownership interest in the Receivables. Notwithstanding the foregoing, if the
RPA Seller were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of such debtor or such debtor itself were to take the
position that the sale of Receivables from such debtor to the Seller should
be recharacterized as a pledge of such Receivables to secure a borrowing from
such debtor, then delays in payments of collections of Receivables to the
Seller could occur or (should the court rule in favor of any such trustee,
debtor in possession or creditor) reductions in the amount of such payments
could result. See "Special Considerations -- Certain Legal Aspects".
In a 1993 case decided by the U.S. Court of Appeals for the Tenth
Circuit, Octagon Gas System, Inc. v. Rimmer, the court determined that
"accounts", a defined under the Uniform Commercial Code, would be included in
the bankruptcy estate of a transferor regardless of whether the transfer is
treated as a sale or a secured loan. Although the Receivables are likely to
be viewed as "chattel paper", as defined under the Uniform Commercial Code,
rather than as accounts, the Octagon holding is equally applicable to chattel
paper. The circumstances under which the Octagon ruling would apply are not
fully
57
known and the extent to which the Octagon decision will be followed in
other courts or outside of the Tenth Circuit is not certain. If the holding
in the Octagon case were applied in a CFC bankruptcy, however, even if the
transfer of Receivables to the Seller and the Trust were treated as a sale,
the Receivables would be part of CFC's bankruptcy estate and would be subject
to claims of certain creditors, and delays and reductions in payments to the
Seller and Certificateholders could result.
In addition, if the RPA Seller were to become a debtor in a bankruptcy
case and a creditor or trustee-in-bankruptcy of such debtor or such debtor
itself were to request a court to order that CFC should be substantively
consolidated with the Seller, delays in payments on the Certificates could
result. Should the bankruptcy court rule in favor of any such creditor,
trustee-in-bankruptcy or such debtor, reductions in such payments could
result.
The Seller has warranted to the Trust that the transfer of the
Receivables to the Trust is a sale of the Receivables to the Trust. The
Seller has or will take all actions that are required under Michigan law to
perfect the Trust's ownership interest in the Receivables and the Seller has
warranted to the Trust that the Trust will at all times have a first priority
perfected ownership interest therein and, with certain exceptions, in
proceeds thereof. Nevertheless, a tax or government lien on property of CFC
or the Seller arising prior to the time a Receivable is conveyed to the Trust
may have priority over the interest of the Trust in such Receivable. Each of
CARCO's and USA's certificate of incorporation provides that it shall not
file a voluntary application for relief under Title 11 of the United States
Code (the "Bankruptcy Code") without the affirmative vote of its two
independent directors. Pursuant to the Pooling and Servicing Agreement, the
Trustee, all Certificateholders and any Enhancement Provider will covenant
that they will not at any time institute against the Seller any bankruptcy,
reorganization or other proceedings under any federal or state bankruptcy or
similar law. In addition, certain other steps will be taken to avoid the
Seller's becoming a debtor in a bankruptcy case. Notwithstanding such steps,
if the Seller were to become a debtor in a bankruptcy case, and a bankruptcy
trustee for the Seller or the Seller as debtor in possession or a creditor of
the Seller were to take the position that the transfer of the Receivables
from the Seller to the Trust should be recharacterized as a pledge of such
Receivables, then delays in payments on the Certificates or (should the court
rule in favor of any such trustee, debtor in possession or creditor)
reductions in the amount of such payments could result.
The Seller does not intend to file, and CFC has agreed that it will not
cause the Seller to file, a voluntary application for relief under the
Bankruptcy Code or any similar applicable state law with respect to the
Seller so long as the Seller is solvent and does not foresee becoming
insolvent.
If the RPA Seller or the Seller were to become a debtor in a bankruptcy
case causing a Reinvestment Event or an Early Amortization Event to occur
with respect to the Certificates of each Series, then, pursuant to the
Receivables Purchase Agreement, new Receivables would no longer be
transferred to the Seller and, pursuant to the Pooling and Servicing
Agreement, only collections on Receivables theretofore sold to the
Seller and transferred to the Trust would be available to be applied to pay
interest accruing on the Certificates and to pay the principal amount of the
Certificates. Under such circumstances, the Servicer is obligated to allocate
all collections on Principal Receivables to the oldest principal balance
first. If such allocation method were to be altered by the bankruptcy court,
the rate of payment on the Certificates might be adversely affected. In
addition, distributions in respect of principal on each Certificate would not
be subject to any applicable Controlled Distribution Amount.
The occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer will result in a Service Default,
which Service Default, in turn, may result in a Reinvestment Event or an
Early Amortization Event with respect to a Series. If no other Service
Default other than the commencement of such bankruptcy or similar event
exists, a trustee-in-bankruptcy of the Servicer may have the power to prevent
either the Trustee or the Certificateholders from appointing a successor
Servicer.
Payments made in respect of repurchases of Receivables by CFC or the
Seller pursuant to the Pooling and Servicing Agreement may be recoverable by
CFC or the Seller, as debtor in possession, or
58
by a creditor or a trustee-in-bankruptcy of CFC or the Seller as a
preferential transfer from CFC or the Seller if such payments are made within
one year prior to the filing of a bankruptcy case in respect of CFC.
CARCO does not intend to file, and CFC has agreed that it will not
cause CARCO to file, a voluntary application for relief under the Bankruptcy
Code or any similar applicable state law with respect to CARCO so long as
CARCO is solvent and does not foresee becoming insolvent.
CERTAIN TAX MATTERS
Federal Income Tax Consequences
Set forth below is a discussion of federal income tax consequences to
holders of the Certificates. This discussion does not purport to deal with
all aspects of federal income taxation that may be relevant to holders of the
Certificates in light of their personal investment circumstances, nor to
certain types of holders subject to special treatment under the federal
income tax laws (for example, banks, life insurance companies and tax-exempt
organizations). Prospective investors are advised to consult their own tax
advisors with regard to the federal income tax consequences of holding and
disposing of the Certificates, as well as the tax consequences arising under
the laws of any state, foreign country or other jurisdiction. This discussion
is based upon present provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the regulations promulgated thereunder, and judicial or
ruling authority, all of which are subject to change, which change may be
retroactive. No ruling on any of the issues discussed below will be sought
from the Internal Revenue Service (the "IRS").
The discussion assumes that a Certificate is issued in registered form,
has all payments denominated in U.S. dollars, has a term that exceeds one
year, and does not bear "contingent interest" as defined in Section 871(h)(4)
of the Code. Moreover, except as provided below, the discussion assumes that
the interest on the Certificate meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations") relating to
original issue discount ("OID"), and that any OID on the Certificate (i.e.,
any excess of the principal amount of the Certificate over its issue price)
does not exceed a de minimis amount (i.e., is less than 1/4% of its principal
amount multiplied by the number of full years until its maturity date), all
within the meaning of the OID regulations. If those conditions are not
satisfied, additional tax considerations will be disclosed in the applicable
Prospectus Supplement.
Treatment of the Certificates as Indebtedness of the Seller. The Seller
and the holders of Certificates offered hereby will express in the Pooling
and Servicing Agreement the intent that, for federal, state and local income
and franchise tax purposes and Michigan single business tax purposes, the
Certificates will be indebtedness of the Seller secured by the Receivables
and any other Trust assets allocable to the Certificates. USA, by the
acceptance of the assignment of the Pooling and Servicing Agreement agreed,
and each Certificateholder, by the acceptance of a Certificate, will agree to
treat the Certificates as indebtedness of the Seller for federal, state and
local income and franchise tax purposes and Michigan single business tax
purposes. However, the Pooling and Servicing Agreement generally refers to
the transfer of the Receivables as a "sale", and because different criteria
are used in determining the nontax accounting treatment of the transaction,
the Seller will treat the Pooling and Servicing Agreement, for certain nontax
purposes, as effecting a transfer of an ownership interest in the Receivables
and not as creating a debt obligation of the Seller.
A basic premise of federal income tax law is that the economic
substance of a transaction generally determines the tax consequences. The
form of a transaction, while a relevant factor, is not conclusive evidence of
its economic substance. In appropriate circumstances, the courts have allowed
taxpayers, as well as the IRS, to treat a transaction in accordance with its
economic substance, as determined under federal income tax law, even though
the participants in the transaction have characterized it differently for
nontax purposes.
The determination of whether the economic substance of a property
transfer is a sale or a loan secured by the transferred property has been
made by the IRS and the courts on the basis of numerous factors designed to
determine whether the transferor has relinquished (and the transferee has
obtained)
59
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the transferee has the opportunity to
gain if the property increases in value, and has the risk of loss if the
property decreases in value. Based upon its analysis of such factors,
Cravath, Swaine & Moore, special tax counsel to the Seller and the Trust
("Tax Counsel"), is of the opinion that for federal income tax purposes the
Seller will properly be treated as the owner of the Receivables and any other
Trust assets allocable to the Certificates and, accordingly, the Certificates
will properly be characterized as indebtedness of the Seller that is secured
by the Receivables and such other assets.
Interest Income to Certificateholders. Assuming the Certificates are
debt obligations for federal income tax purposes, they will not be considered
issued with OID (except as discussed below or in the applicable Prospectus
Supplement). Interest thereon will be taxable as ordinary interest income
when received by Certificateholders utilizing the cash-basis method of
accounting and when accrued by Certificateholders utilizing the accrual
method of accounting. Under the OID regulations, a holder of a Certificate
issued with a de minimis amount of OID must include such OID in income, on a
pro rata basis, as principal payments are made on the Certificate. It is
believed that any Asset Composition Premium paid as a result of an Asset
Composition Event will be taxable as contingent interest when it becomes
fixed and unconditionally payable. A Certificateholder who buys a Certificate
for less than its principal amount will be subject to the "market discount"
rules of the Code, and a Certificateholder who buys a Certificate for more
than its principal amount will be subject to the premium amortization rules
of the Code.
However, if any interest due on a Series or Class of Certificates is
not paid in full on its scheduled payment date, or if the amount of interest
payable currently on a Series or Class is reduced because of a limitation
based on the average interest rate currently payable on the Receivables,
Certificates of that Series or Class will thereafter be considered to be
issued with OID. Moreover, even before such an event, the Certificates of a
Series or Class would be considered to have OID from their date of issuance
unless, at the time of issuance, the likelihood of a late payment or
nonpayment of interest (or reduction in the amount of interest payable based
on the interest rate currently payable on the Receivables) on such Series or
Class was considered a "remote contingency" under applicable Treasury
regulations.
The Seller intends to take the position, based on the exception for
remote contingencies, that OID does not arise on a Series or Class of
Certificates unless and until an event described in the first sentence of the
preceding paragraph occurs. However, if the Investor Certificates of a Series
or Class were considered to have OID, either initially or subsequently, all
holders of Certificates of that Series or Class would thereafter be required
to accrue OID into income at a rate equal to the full interest rate payable
on the Certificates (probably determined without regard to any limitation
based upon the interest payable on the Receivables), whether or not all or
part of the interest on the Certificates was paid currently. Moreover, the
holders would be required to accrue any de minimis discount into income over
the life of the Certificates rather than when principal is paid. As a result,
holders might be required to report taxable income prior to the receipt of
cash attributable to such income.
The Trustee will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid on the Certificates
(and the amount of interest withheld for federal income taxes, if any) for
each calendar year, except as to exempt holders (generally, holders that are
corporations, tax-exempt organizations, qualified pension and profit-sharing
trusts, individual retirement accounts, or nonresident aliens who provide
certification as to their status as nonresidents). Accordingly, each
nonexempt Certificateholder will be required to provide, under penalties of
perjury, a certificate on IRS Form W-9 containing such holder's name,
address, federal taxpayer identification number and a statement that such
holder is not subject to backup withholding. Should a nonexempt
Certificateholder fail to provide the required certification, the
Trustee (or the Participants or Indirect Participants) will be required to
withhold (or cause to be withheld) 31% of the interest (and principal)
otherwise payable to the holder, and remit the withheld amounts to the IRS as
a credit against the holder's federal income tax liability.
Possible Classification of the Trust as a Partnership or Association.
As described above, it is the opinion of Tax Counsel that the Certificates
offered hereby will properly be characterized as debt of the
60
Seller for federal income tax purposes. However, such opinion is not binding
on the IRS and thus no assurance can be given that such a characterization
will prevail.
For example, if the IRS were to contend successfully that the
Certificates offered hereby were not debt of the Seller for federal income
tax purposes, the Trust might be classified for federal income tax purposes
as a partnership, an association taxable as a corporation or a "publicly
traded partnership" taxable as a corporation. If the Certificates are treated
as interests in such a partnership, the partnership would in all likelihood
be treated as a "publicly traded partnership". A publicly traded partnership
is, in general, taxable as a corporation. If the partnership were
nevertheless not taxable as a corporation (because of an exception for an
entity whose income is interest income that is not derived in the conduct of
a financial business) it would not be subject to federal income tax. Rather,
each item of income, gain, loss, deduction and credit generated through the
ownership of the Receivables by the partnership would be passed through to
the partners in the partnership (including the Certificateholders) according
to their respective interests therein.
The income reportable by the Certificateholders as partners in such a
partnership could differ from the income reportable by the Certificateholders
as holders of debt. However, except as provided below, it is not expected
that such differences would be material. If the Certificateholders were
treated as partners, a cash basis Certificateholder might be required to
report income when it accrues to the partnership rather than when it is
received by the Certificateholder. Moreover, if the Certificates are
interests in a partnership, an individual's share of expenses of the
partnership would be miscellaneous itemized deductions that in the aggregate
are allowed only to the extent they exceed two percent of the individual's
adjusted gross income (and are subject to certain other limitations), meaning
that the individual might be taxed on a greater amount of income than the
stated interest on the Certificates. Finally, if any Certificates are treated
as equity interests in a partnership in which other Certificates are debt,
all or part of a tax-exempt investor's share of income from the Certificates
that are treated as equity would be treated as unrelated debt-financed income
under the Code taxable to the investor.
If, alternatively, the Trust were treated as either an association
taxable as a corporation or a "publicly traded partnership" taxable as a
corporation, the resulting entity would be subject to federal income taxes at
corporate tax rates on its taxable income generated by ownership of the
Receivables. Moreover, distributions by the entity would probably not be
deductible in computing the entity's taxable income and all or part of
distributions to Certificateholders would probably be treated as dividend
income to the Certificateholders. Such an entity-level tax could result in
reduced distributions to Certificateholders and the Certificateholders could
be liable for a share of such a tax.
Because the Seller will treat the Certificates offered hereby as
indebtedness for federal income tax purposes, the Trustee (and Participants
and Indirect Participants) will not comply with the tax reporting
requirements that would apply under these alternative characterizations of
the Certificates.
Foreign Investors. Tax Counsel has given its opinion that the
Certificates will properly be classified as debt of the Seller for federal
income tax purposes. If the Certificates are so treated:
(a) interest paid or accrued to a nonresident alien or foreign
corporation or partnership would be exempt from U.S. withholding taxes
(including backup withholding taxes); provided that the holder complies
with applicable identification requirements (and does not actually or
constructively own 10% or more of the voting stock of the Seller and is
not a controlled foreign corporation with respect to the Seller).
Applicable identification requirements will be satisfied if there is
delivered to a securities clearing organization (or bank or other
financial institution that holds the Certificates on behalf of the
customer in the ordinary course of its trade or business) (i) IRS Form
W-8 signed under penalties of perjury by the beneficial owner of such
Certificates stating that the holder is not a U.S. person and providing
such holder's name and address, (ii) IRS Form 1001 signed by the
beneficial owner of such Certificates or such owner's agent claiming
exemption from withholding under an applicable tax treaty, or (iii) IRS
Form 4224 signed by the beneficial owner of such Certificates or such
owner's agent claiming exemption from withholding of tax on income
connected with the conduct of a trade or business in the United States;
provided that
61
in any such case (x) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the United States
entity otherwise required to withhold tax and (y) none of the entities
receiving the form has actual knowledge that the holder is a U.S.
person or that any certification on the form is false. Recently adopted
Treasury Regulations modify these procedures for claiming exemption
from withholding taxes, effective for payments made after December 31,
2000;
(b) a holder of a Certificate who is a nonresident alien or
foreign corporation will not be subject to United States federal income
tax on gain realized on the sale, exchange or redemption of such
Certificate, provided that (i) such gain is not effectively connected
to a trade or business carried on by the holder in the United States,
(ii) in the case of a holder that is an individual, such holder is not
present in the United States for 183 days or more during the taxable
year in which such sale, exchange or redemption occurs and (iii) in the
case of gain representing accrued interest, the conditions described in
clause (a) are satisfied; and
(c) a Certificate held by an individual who at the time of death
is a nonresident alien will not be subject to United States federal
estate tax as a result of such individual's death if, immediately
before his death, (i) the individual did not actually or constructively
own 10% or more of the voting stock of the Seller and (ii) the holding
of such Certificate was not effectively connected with the conduct by
the decedent of a trade or business in the United States.
If the IRS were to contend successfully that the Certificates are
interests in a partnership (not taxable as a corporation), a
Certificateholder that is a nonresident alien or foreign corporation might be
required to file a U.S. individual or corporate income tax return and pay tax
on its share of partnership income at regular U.S. rates, including, in the
case of a corporation, the branch profits tax (and would be subject to
withholding tax on its share of partnership income). If the Certificates are
recharacterized as interests in an association taxable as a corporation or a
"publicly traded partnership" taxable as a corporation, to the extent
distributions on the Certificates were treated as dividends, a nonresident
alien individual or foreign corporation would generally be taxed on the gross
amount of such dividends (and subject to withholding) at a rate of 30% unless
such rate were reduced by an applicable treaty.
State and Local Tax Consequences
The activities to be undertaken by the Servicer in servicing and
collecting the Receivables will take place in Michigan. The State of Michigan
imposes a state individual income tax and a single business tax which is
based partially upon the net income of corporations, partnerships and other
entities doing business in the State of Michigan. This discussion is based
upon present provisions of Michigan statutes and the regulations promulgated
thereunder, and applicable judicial or ruling authority, all of which are
subject to change, which change may be retroactive. No ruling on any of the
issues discussed below will be sought from the Michigan Department of
Treasury.
If the Certificates are treated as debt of the Seller for federal
income tax purposes, in the opinion of Christopher A. Taravella, Esq., Vice
President and General Counsel of the Seller, Michigan tax counsel to the
Seller and the Trust ("Michigan Tax Counsel"), this treatment will also apply
for Michigan tax purposes. Pursuant to this treatment, the Trust will not be
subject to the Michigan single business tax and Certificateholders not
otherwise subject to Michigan tax would not become subject to such tax solely
because of their ownership of the Certificates. Certificateholders already
subject to taxation in Michigan, however, could be required to pay tax on the
income generated from ownership of these Certificates.
In the alternative, if the Trust is treated as a partnership (not
taxable as a corporation) for federal income tax purposes, in the opinion of
Michigan Tax Counsel, the same treatment should also apply for Michigan tax
purposes. In such case, the resulting constructive partnership should not be
treated as doing business in Michigan but rather should be treated as a
passive holder of investments and, as a result, should not be subject to the
Michigan single business tax (which, if applicable, could result in reduced
distributions to Certificateholders). The Certificateholders also should not
be subject to Michigan single business tax on the income received through the
partnership.
62
Under current law, Certificateholders that are nonresidents of Michigan
and that are not otherwise subject to Michigan income tax should not
be subject to Michigan income tax on the income from the constructive
partnership. Under current law corporate Certificateholders are not subject
to Michigan income tax. In any event, classification of the arrangement as a
"partnership" would not cause a Certificateholder not otherwise subject to
taxation in Michigan to pay Michigan tax on income beyond that derived from
the Certificates.
If the Certificates are instead treated as ownership interests in an
association or "publicly traded partnership", the hypothetical entity should
not be subject to the Michigan single business tax (which, if applicable,
could result in reduced distributions to Certificateholders). A
Certificateholder not otherwise subject to tax in Michigan would not become
subject to Michigan tax as a result of its mere ownership of such an
interest.
Because each state's income tax laws vary, it is impossible to predict
the income tax consequences to the Certificateholders in all of the state
taxing jurisdictions in which they are already subject to tax.
Certificateholders are urged to consult their own tax advisors with respect
to state income and franchise taxes.
ERISA CONSIDERATIONS
General
Section 406 of ERISA and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan from engaging in certain
transactions involving "plan assets" with persons that are "parties in
interest" under ERISA or "disqualified persons" under the Code with respect
to the plan. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for such person.
For example, a prohibited transaction would arise, unless an exemption were
available, if the Certificates of a Series or Class were viewed as debt of
the Seller and the Seller were a disqualified person or party in interest
with respect to a plan that acquired Certificates of such Series or Class.
Moreover, additional prohibited transactions could arise if the assets
of the Trust were deemed to constitute assets of any plan that owned
Certificates. The Department of Labor ("DOL") has issued a final regulation
(the "Plan Assets Regulation") concerning the definition of what constitutes
the "plan assets" of an employee benefit plan subject to ERISA, the Code or
an individual retirement account ("IRA") (collectively referred to as
"Benefit Plans"). Under the Plan Assets Regulation the assets and properties
of certain corporations, partnerships and certain other entities in which a
Benefit Plan acquires an "equity interest" could be deemed to be assets of
the Benefit Plan in certain circumstances. Accordingly, if Benefit Plans
purchase Certificates, the Trust could be deemed to hold plan assets of such
Benefit Plan unless one of the exceptions under the Plan Assets Regulation is
applicable to the Trust.
The Plan Assets Regulation only applies to the purchase by a Benefit
Plan of an "equity interest" in an entity. Assuming that the Certificates of
a Series or Class are equity interests, the Plan Assets Regulation contains
an exception that provides that if a Benefit Plan acquires a
"publicly-offered security", the issuer of the security is not deemed to hold
plan assets. A publicly-offered security is a security that is (i) freely
transferable, (ii) part of a class of securities that is owned by 100 or more
investors independent of the issuer and of one another and (iii) either is
(A) part of a class of securities registered under Section 12(b) or 12(g) of
the Exchange Act or (B) sold to the plan as part of an offering of securities
to the public pursuant to an effective registration statement under the
Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Securities and Exchange Commission) after the end of
the fiscal year of the issuer during which the offering of such securities to
the public occurred.
The Certificates of each Series and Class must be separately tested
under, and may each meet, the criteria of publicly-offered securities as
described above. There are no restrictions imposed on the transfer of the
Certificates offered hereby; and such Certificates will be sold as part of an
offering
63
pursuant to an effective registration statement under the Securities Act, and
may or may not be timely registered under the Exchange Act. Based on
information provided by the underwriter or placement agent for Certificates
of any Series or Class offered hereby that will be registered under the
Exchange Act, the Seller will notify the Trustee as to whether or not
Certificates of such Series or, if such Series consists of more than one
Class, each such Class will be held by at least 100 separately named persons
at the conclusion of the offering, unless the related Prospectus Supplement
otherwise provides. The Seller will not determine whether the 100-investor
requirement of the exception for publicly offered securities is satisfied as
to the Certificates of any Series or Class. Prospective purchasers may obtain
a copy of the notification described in the third preceding sentence from the
Trustee at 101 Barclay Street, New York, New York 10286.
If the Certificates of any Series or Class offered hereby fail to meet
the criteria of publicly-offered securities and the Trust's assets are deemed
to include assets of Benefit Plans that are holders of such Certificates,
transactions involving the Trust and "parties in interest" or "disqualified
persons" with respect to such plans might be prohibited under Section 406 of
ERISA and Section 4975 of the Code unless an exemption is applicable. Thus,
for example, if a participant in any Benefit Plan is an obligor or guarantor
of one of the Receivables, under DOL interpretations the purchase of such
Certificates by such plan could constitute a prohibited transaction. There
are a number of class exemptions issued by the DOL that may apply in such
event. However, even if all of the conditions specified in the exemptions are
satisfied, they would probably not apply to all transactions involving the
Trust's assets.
In light of the foregoing, fiduciaries of a Benefit Plan considering
the purchase of Certificates of any Series or Class offered hereby should
consult their own counsel as to whether the assets of the Trust which are
represented by such Certificates would be considered plan assets, and the
consequences that would apply if the Trust's assets were considered plan
assets.
In addition, based on the reasoning of the United States Supreme
Court's decision in John Hancock Life Ins. Co. v. Harris Trust and Sav. Bank,
510 U.S. 86 (1993), under certain circumstances assets in the general account
of an insurance company may be deemed to be plan assets for certain purposes,
and under such reasoning a purchase of Certificates with assets of an
insurance company's general account might be subject to the prohibited
transaction rules described above. Insurance companies investing assets of
their general accounts should also consider the potential effects of the
enactment of Section 401(c) of ERISA, Prohibited Transaction Exemption 95-60,
and Proposed Labor Department Regulation Section 2550.401c-1.
Unless otherwise provided in the applicable Prospectus Supplement, if
the Certificates will not be timely registered under the Exchange Act, or if
the Seller does not notify the Trustee, as described above, that the
Certificates of any particular Series or Class will be expected to be held by
at least 100 persons, the Certificates of such Series or Class, as the case
may be, may not be acquired by any Benefit Plan or by any entity investing
assets that are treated as assets of a Benefit Plan. Furthermore, in that
case, the Pooling and Servicing Agreement, the Series Supplement and each
such Certificate will provide that each holder of such Certificate shall be
deemed to have represented and warranted that it is not a Benefit Plan and is
not purchasing such Certificate on behalf of a Benefit Plan or with assets
that are treated as assets of a Benefit Plan.
EXPERTS
The financial statements of the Trust as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997
incorporated in this Prospectus by reference from the Trust's Annual Report
on Form 10-K for the year ended December 31, 1997, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
64
PLAN OF DISTRIBUTION
The Seller may sell Certificates offered hereby in any of three ways:
(i) through underwriters or dealers; (ii) directly to one or more purchasers;
or (iii) through agents. The related Prospectus Supplement will set forth the
terms of the offering of any Series Certificates offered hereby, including,
without limitation, the names of any underwriters, the purchase price of such
Certificates and the proceeds to the Seller from such sale, any underwriting
discounts and other items constituting underwriter's compensation, any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series
offered hereby, such Certificates will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices to be determined at the time of sale or at the
time of commitment therefor. Such Certificates may be offered to the public
either through underwriting syndicates represented by managing underwriters
or by underwriters without a syndicate. Unless otherwise set forth in the
related Prospectus Supplement, the obligations of the underwriters to
purchase such Certificates will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all of such
Certificates if any of such Certificates are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid
to dealers may be changed from time to time.
Certificates of a Series offered hereby may also be offered and sold,
if so indicated in the related Prospectus Supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption or repayment
pursuant to their terms, by one or more firms ("remarketing firms") acting as
principals for their own accounts or as agents for the seller. Any
remarketing firm will be identified and the terms of its agreement, if any,
with the Seller and its compensation will be described in the related
Prospectus Supplement. Remarketing firms may be deemed to be underwriters in
connection with the Certificates remarketed thereby.
Certificates may also be sold directly by the Seller or through agents
designated by the Seller from time to time. Any agent involved in the offer
or sale of Certificates will be named, and any commissions payable by the
Seller to such agent will be set forth, in the related Prospectus Supplement.
Unless otherwise indicated in the related Prospectus Supplement, any such
agent will act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution
of Certificates may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of Certificates may be
deemed to be underwriting discounts and commissions, under the Securities
Act. Agents and underwriters may be entitled under agreements entered into
with the Seller and CFC to indemnification by the Seller and CFC against
certain civil liabilities, including liabilities under the Securities Act, or
to contribution with respect to payments that the agents or underwriters may
be required to make in respect thereof. Agents and underwriters may be
customers of, engage in transactions with, or perform services for, the
Seller or its affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will
be passed upon for USA by Christopher A. Taravella, Vice President and
General Counsel of Chrysler Financial Company L.L.C., and for any
underwriters, agents or dealers by the counsel named in the applicable
Prospectus Supplement. Certain federal income tax and ERISA matters will be
passed upon for USA and the Trust by the counsel named in the applicable
Prospectus Supplement.
65
INDEX OF PRINCIPAL TERMS
Term Page
---- ----
Accounts ............................................ 1
Accumulation Period ................................. 9
Addition Date ....................................... 35
Additional Accounts ................................. 38
Additional Cut-Off Date ............................. 35
Adjusted Invested Amount ............................ 44
Adjustment Payment .................................. 47
Auction Vehicles .................................... 22
Automatic Additional Accounts ....................... 38
Automatic Removal Date .............................. 41
Automatic Removed Accounts .......................... 41
Bankruptcy Code ..................................... 58
Benefit Plans ....................................... 63
CARCO ............................................... 3
CARCO Transfer ...................................... 3
CCC ................................................. 3
Cede ................................................ 2
CEDEL ............................................... 31
Certificateholder ................................... 31
Certificateholders .................................. 2
Certificateholders' Interest ........................ 5
Certificates ........................................ 1
CFC ................................................. 1
CFC Corp ............................................ 4
Chrysler ............................................ 1
Citibank ............................................ 30
Class ............................................... 1
Code ................................................ 59
Collateral Security ................................. 3
Collection Account .................................. 41
Collection Period ................................... 7
Commission .......................................... 2
Controlled Amortization Amount ...................... 10
Controlled Amortization Period ...................... 10
Controlled Deposit Amount ........................... 10
Cooperative ......................................... 31
DaimlerChrysler ..................................... 3
Dealer Overconcentrations ........................... 38
Dealer Trouble ...................................... 24
Dealers ............................................. 4
Defaulted Amount .................................... 47
Defaulted Receivables ............................... 47
Definitive Certificates ............................. 32
Depository .......................................... 27
Designated Accounts ................................. 39
Designated Balance .................................. 39
Designated Receivables .............................. 40
Determination Date .................................. 13
Disclosure Document ................................. 33
Distribution Date Statement ......................... 53
DOL ................................................. 63
DTC ................................................. 2
66
Term Page
---- ----
Early Amortization Event ............................ 48
Early Amortization Period ........................... 12
Eligible Account .................................... 36
Eligible Accounts ................................... 4
Eligible Dealer ..................................... 37
Eligible Deposit Account ............................ 41
Eligible Institution ................................ 42
Eligible Investments ................................ 42
Eligible Portfolio .................................. 26
Eligible Receivable ................................. 37
Eligible Receivables ................................ 5
Enhancement ......................................... 3
Enhancement Provider ................................ 36
ERISA ............................................... 15
Euroclear ........................................... 31
Euroclear Operator .................................. 31
Euroclear Participants .............................. 31
Excess Funded Amount ................................ 8
Excess Funding Account .............................. 8
Excess Principal Collections ........................ 44
Exchange Act ........................................ 2
Excluded Series ..................................... 13
Expected Payment Date ............................... 8
finance hold ........................................ 22
Fleet Receivables ................................... 21
Foreign Agency Depositaries ......................... 30
Fully Reinvested Date ............................... 11
Holders ............................................. 32
IML ................................................. 31
Indirect Participants ............................... 30
Ineligible Receivables .............................. 35
Initial Closing Date ................................ 34
Initial Cut-Off Date ................................ 3
Initial Invested Amount ............................. 44
Insolvency Laws ..................................... 20
Installment Balance ................................. 37
Installment Balance Amount .......................... 38
Interest Collections ................................ 5
Interest Funding Account ............................ 7
Interest Payment Dates .............................. 7
Invested Amounts .................................... 36
Investor Default Amount ............................. 47
IRA ................................................. 63
IRS ................................................. 59
Michigan Tax Counsel ................................ 62
Miscellaneous Payments .............................. 44
Monthly Servicing Fee ............................... 51
Moody's ............................................. 42
Morgan .............................................. 30
New Issuance ........................................ 6
New Vehicles ........................................ 22
OID ................................................. 59
67
Term Page
---- ----
OID Regulations ..................................... 59
Overconcentration Amount ............................ 38
Paired Series ....................................... 13
Participants ........................................ 30
Plan Assets Regulation .............................. 63
Pool Balance ........................................ 33
Pooling and Servicing Agreement ..................... 3
Prime Rate .......................................... 23
Principal Shortfalls ................................ 45
Principal Collections ............................... 5
Principal Commencement Date ......................... 8
Principal Funding Account ........................... 10
Principal Receivables ............................... 6
Principal Terms ..................................... 33
Prospectus Supplement ............................... 1
Rating Agency ....................................... 19
Receivables ......................................... 1
Receivables Purchase Agreement ...................... 5
Registration Statement .............................. 2
Reinvestment Event .................................. 48
Reinvestment Period ................................. 11
Reinvestment Period Commencement Date ............... 11
Remarketing firms ................................... 65
Removal and Repurchase Date ......................... 40
Removal Commencement Date ........................... 39
Removal Date ........................................ 39
Removal Notice ...................................... 39
Removed Account ..................................... 40
Repurchased Receivables ............................. 40
Repurchased Receivables Purchase Price .............. 40
Required Participation Amount ....................... 39
Required Participation Percentage ................... 39
Revolving Period .................................... 9
RPA Seller .......................................... 5
Securities Act ...................................... 2
Seller .............................................. 1
Seller's Certificate ................................ 33
Seller's Interest ................................... 1
Series .............................................. 1
Series Allocable Defaulted Amount ................... 44
Series Allocable Interest Collections ............... 44
Series Allocable Miscellaneous Payments ............. 44
Series Allocable Principal Collections .............. 44
Series Allocation Percentage ........................ 44
Series Cut-off Date ................................. 9
Series Issuance Date ................................ 35
Series Supplement ................................... 6
Series Termination Date ............................. 49
Service Default ..................................... 52
Service Transfer .................................... 52
Servicer ............................................ 1
Servicing Fee ....................................... 51
68
Term Page
---- ----
Servicing Fee Rate .................................. 51
Special Payment Date ................................ 12
Standard & Poor's ................................... 42
Supplemental Certificate ............................ 33
Tax Counsel ......................................... 60
Tax Opinion ......................................... 34
Terms and Conditions ................................ 32
Transfer Date ....................................... 35
Transfer Deposit Amount ............................. 36
Trust ............................................... 1
Trust Adjusted Invested Amount ...................... 44
Trust Available Subordinated Amount ................. 35
Trustee ............................................. 3
U.S. Wholesale Portfolio ............................ 22
UCC ................................................. 16
Unallocated Principal Collections ................... 45
USA ................................................. 1
Used Vehicles ....................................... 22
Vehicles ............................................ 3
69
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered
Certificates (the "Global Securities") will be available only in book-entry
form. Unless otherwise specified in a Prospectus Supplement for a Series,
investors in the Global Securities may hold such Global Securities through
any of The Depository Trust Company ("DTC"), CEDEL or Euroclear. The Global
Securities will be tradeable as home market instruments in both the European
and U.S. domestic markets. Initial settlement and all secondary trades will
settle in same-day funds.
Secondary market trading between investors holding Global Securities
through CEDEL and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures
applicable to U.S. corporate debt obligations.
Secondary cross-market trading between CEDEL or Euroclear and DTC
participants holding Global Securities will be effected on a
delivery-against-payment basis through Citibank, N.A. ("Citibank") and Morgan
Guaranty Trust Company of New York ("Morgan") as the respective depositaries
of CEDEL and Euroclear and as participants in DTC.
Non-U.S. holders of Global Securities will be exempt from U.S.
withholding taxes, provided that such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing
organizations or their participants.
Initial Settlement
All Global Securities will be held in book-entry form by DTC in the
name of Cede Co. as nominee of DTC. Investors' interests in the Global
Securities will be represented through financial institutions acting on their
behalf as direct and indirect participants in DTC. As a result, CEDEL and
Euroclear will hold positions on behalf of their participants through their
respective depositaries, Citibank and Morgan, which in turn will hold such
positions in accounts as participants of DTC.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to securities previously issued by
the Trust. Investor securities custody accounts will be credited with their
holdings against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through CEDEL or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global
[security and no "lock-up" or restricted period. Global Securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important
to establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired
value date.
Trading between DTC participants. Secondary market trading between DTC
participants will be settled using the procedures applicable to securities
previously issued by the Trust in same-day funds.
Trading between CEDEL and/or participants. Secondary market trading
between CEDEL participants and/or Euroclear participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
A-1
Trading between DTC seller and CEDEL or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC participant
to the account of a CEDEL participant or a Euroclear participant the
purchaser will send instructions to CEDEL or Euroclear through a participant
at least one business day prior to settlement. CEDEL or Euroclear will
instruct Citibank or Morgan, respectively, as the case may be, to receive the
Global Securities against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment
date to and excluding the settlement date. For transactions settling on the
31st day of the month, payment will include interest accrued to and excluding
the first day of the following month. Payment will then be made by Citibank
or Morgan to the DTC participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will
be credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the CEDEL participant's or Euroclear
participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest
on the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the CEDEL or
Euroclear cash debit will be valued instead as of the actual settlement date.
CEDEL participants and Euroclear participants will need to make
available to the respective clearing systems the funds necessary to process
same-day funds settlement. The most direct means of doing so is to
preposition funds for settlement, either from cash on hand or existing lines
of credit, as they would for any settlement occurring within CEDEL or
Euroclear. Under this approach, they may take on credit exposure to CEDEL or
Euroclear until the Global Securities are credited to their accounts one day
later.
As an alternative, if CEDEL or Euroclear has extended a line of credit
to them, participants can elect not to preposition funds and allow that
credit line to be drawn upon to finance settlement. Under this procedure,
CEDEL participants or Euroclear participants purchasing Global Securities
would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts.
However, interest on the Global Securities would accrue from the value date.
Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the
amount of such overdraft charges, although this result will depend on each
participant's particular cost of funds.
Since the settlement is taking place during New York business hours,
DTC participants can employ their usual procedures for sending Global
Securities to Citibank or Morgan for the benefit of CEDEL participants or
Euroclear participants. The sale proceeds will be available to the DTC seller
on the settlement date. Thus, to the DTC participant a cross-market
transaction will settle no differently than a trade between two DTC
participants.
Trading between CEDEL or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, CEDEL and Euroclear participants may
employ their customary procedures for transactions in which Global Securities
are to be transferred by the respective clearing system, through Citibank or
Morgan, to a DTC participant. The seller will send instructions to CEDEL or
Euroclear through a participant at least one business day prior to
settlement. In these cases, CEDEL or Euroclear will instruct Citibank or
Morgan, as appropriate, to deliver the bonds to the DTC participant's account
against payment. Payment will include interest accrued on the Global
Securities from and including the last coupon payment date to and excluding
the settlement date. For transactions settling on the 31st day of the month,
payment will include interest accrued to and excluding the first day of the
following month. The payment will then be reflected in the account of the
CEDEL participant or Euroclear participant the following day, and receipt of
the cash proceeds in the CEDEL or Euroclear participant's account would be
back-valued to the value date (which would be the preceding day, when
settlement occurred in New York). Should the CEDEL or Euroclear participant
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that
one-day period. If settlement is not completed on the intended value date
(i.e., the trade fails), receipt of the cash proceeds in the CEDEL or
Euroclear participant's account would instead be valued as of the actual
settlement date.
A-2
Finally, day traders that use CEDEL or Euroclear and that purchase
Global Securities from DTC participants for delivery to CEDEL participants or
Euroclear participants should note that these trades would automatically fail
on the sale side unless affirmative action were taken. At least three
techniques should be readily available to eliminate this potential problem:
(1) borrowing through CEDEL or Euroclear for one day (until the
purchase side of the day trade is reflected in their CEDEL or Euroclear
accounts) in accordance with the clearing system's customary
procedures;
(2) borrowing the Global Securities in the U.S. from a DTC
participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their CEDEL or
Euroclear account in order to settle the sale side of the trade; or
(3) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC participant
is at least one day prior to the value date for the sale to the CEDEL
participant or Euroclear participant.
Certain U.S. Federal Income Tax Documentation Requirements
A holder of Global Securities holding securities through CEDEL or
Euroclear (or through DTC if the holder has an address outside the U.S.) will
be subject to the 30% U.S. withholding tax that generally applies to payments
of interest (including original issue discount) on registered debt issued by
U.S. persons, unless such holder takes one of the following steps to obtain
an exemption or reduced tax rate:
Exemption for non-U.S. persons (Form W-8). Non-U.S. persons that are
beneficial owners can obtain a complete exemption from the withholding tax by
filing a signed Form W-8 (Certificate of Foreign Status).
Exemption for non-U.S. persons with effectively connected income (Form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a
U.S. branch, for which the interest income is effectively connected with its
conduct of a trade or business in the United States, can obtain an exemption
from the withholding tax by filing Form 4224 (Exemption from Withholding of
Tax on Income Effectively Connected with the Conduct of a Trade or Business
in the United States).
Exemption or reduced rate for non-U.S. persons resident in treaty
countries (Form 1001). Non-U.S. persons that are beneficial owners residing
in a country that has a tax treaty with the United States can obtain an
exemption or reduced tax rate (depending on the treaty terms) by filing Form
1001 (Ownership, Exemption or Reduced Rate Certificate). If the treaty
provides only for a reduced rate, withholding tax will be imposed at that
rate unless the filer alternatively files Form W-8. Form 1001 may be filed by
the beneficial owner or his agent.
Exemption for U.S. persons (Form W-9). U.S. persons can obtain a
complete exemption from the withholding tax by filing Form W-9 (Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Global Security
holder, or in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom he holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
This summary does not deal with all aspects of federal income tax
withholding that may be relevant to foreign holders of these Global
Securities. Investors are advised to consult their own tax advisors for
specific tax advice concerning their holding and disposing of these Global
Securities.
A-3
[ Back cover, column 1 ]
No dealer, salesman or other person has been authorized to give any
information or to make any representations not contained or incorporated by
reference in this Prospectus Supplement or the accompanying Prospectus and,
if given or made, such information or representations must not be relied upon
as having been authorized by the Seller or the Underwriter. Neither this
Prospectus Supplement nor the accompanying Prospectus constitutes an offer or
solicitation by anyone in any state in which such offer or solicitation is
not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus Supplement or the
accompanying Prospectus, nor any sale made hereunder or thereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Seller since the date hereof or thereof or that the
information contained or incorporated by reference herein or therein is
correct as of any time subsequent to its date
Table of Contents
Page
----
Prospectus Supplement
Summary of Series Terms ............................. S-4
Risk Factors ........................................ S-8
Use of Proceeds ..................................... S-11
The Dealer Floorplan Financing Business ............. S-11
The Accounts ........................................ S-12
CFC's Performance History ........................... S-13
Chrysler Financial Company L.L.C. ................... S-15
Maturity and Principal Payment Considerations ....... S-15
Series Provisions ................................... S-16
Underwriting ........................................ S-37
Legal Matters ....................................... S-38
Index of Principal Terms ............................ S-39
Other Series of Investor Certificates ............... SA-1
Prospectus
Available Information ............................... 2
Reports to Certificateholders ....................... 2
Incorporation of Certain Documents by Reference ..... 2
Prospectus Summary .................................. 3
Risk Factors ........................................ 16
U.S. Auto Receivables Company and the Trust ......... 19
Use of Proceeds ..................................... 21
The Dealer Floorplan Financing Business ............. 21
The Accounts ........................................ 26
Chrysler Financial Company L.L.C., Chrysler Financial
Corporation and Chrysler Credit Corporation ....... 26
Description of the Certificates ..................... 27
Description of the Receivables Purchase Agreement ... 55
Certain Legal Aspects of the Receivables ............ 56
Certain Tax Matters ................................. 59
ERISA Considerations ................................ 63
Experts ............................................. 64
Plan of Distribution ................................ 65
Legal Matters ....................................... 65
Index of Principal Terms ............................ 66
Global Clearance, Settlement and Tax Documentation
Procedures ........................................ A-1
Until August 11, 1999 (90 days after the date of this Prospectus
Supplement), all dealers that effect transactions in these securities,
whether or not participating in this distribution, may be required to deliver
a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
[ Back cover, column 2 ]
[ LOGO ]
DaimlerChrysler
CARCO
Auto Loan
Master Trust
$1,350,000,000
Floating Rate Auto Loan
Asset Backed Certificates,
Series 1999-2
[ LOGOS ]
U.S. AUTO RECEIVABLES COMPANY
Seller
CHRYSLER FINANCIAL COMPANY L.L.C.
Servicer
$750,000,000
Class A-1 Certificates,
due May 17, 2004
$600,000,000
Class A-2 Certificates,
due May 15, 2006
----------
PROSPECTUS SUPPLEMENT
----------
Salomon Smith Barney